SEBI brings art funds under its canvas
Printer Print Email Email
Mumbai: Art funds cannot be set up without obtaining a certificate of registration from Securities and Exchange Board of India (SEBI), a new directive from Indian market regulator says so. Failing this, the regulator can take civil or criminal action against the funds or companies. Art funds raise resources to invest in works of art that are later sold to garner returns for its investors. Art funds are "collective investment schemes" as defined under Section 11AA (2) of the SEBI Act, 1992. Only a company that has been granted certificate of registration by SEBI can launch or sponsor a collective investment scheme, states a SEBI press release According to Section 12 (1B) of the SEBI Act, "no person shall sponsor or cause to be sponsored or cause to be carried on a collective investment scheme unless he obtains a certificate of registration from SEBI". "For a collective investment scheme to raise money from the public, it is a prerequisite that the entity must (a) be a company and (b) registered with SEBI as collective investment management company," said the release. The growing wealth of Indians and the booming international market for Indian art have seen a number of art funds cropping up over the past two or three years. Estimates of the industry size vary from Rs 300 crore to over Rs 1,000 crore. Currently, no art fund is registered with SEBI. Art funds came into the limelight with Osian?s Art Fund in 2006, under which the gallery collected funds worth Rs 102 crore. Last year, the fund with a three-year lock-in period, recorded a 27 percent post-tax annual return, making a five percent interim income sharing payout. "This regulation will create more awareness for the asset class. Such a measure will ensure that there are no fly-by-night operators," said Nipun Mehta, co-founder and CEO, Unitis Wealth Advisors. Added Arun Vadehra, owner, Vadehra Art Gallery, "It will have a positive effect on art prices, giving them some sanctity, in a sense." However artist Kishen Khanna cautions, "The question is, who will do the monitoring. Market regulators don't know too much about art."

siliconindia