Investing in Art is an art and needs registration .. SEBI Cautions

Investing in Art is an art and needs registration ..says SEBI

SEBI has advised investors with regard to their investments in "Art Funds" that "Art Funds" are "Collective Investment Schemes" as defined under the SEBI Act. At present, no entity has registered with SEBI, under the SEBI (Collective Investment Schemes) Regulations.

Launching / floating of "Art Funds" or Schemes without obtaining registration from SEBI amounts to violation of SEBI Act and Regulations. Appropriate actions, civil and criminal, under the SEBI Act may be taken by SEBI against such funds / companies.

This message is issued by SEBI in the interest of investors with regard to their

investments in Art Funds, funds/schemes launched by companies or any entity formed for the purpose. From the analysis of the characteristics of 'art funds' these are 'collective investment schemes' as defined under section 11AA (2) of the SEBI Act, 1992. The schemes/funds have been launched / floated by these entities without obtaining a certificate of registration in accordance with the SEBI (Collective Investment Schemes) Regulations, 1999 (the Regulations).

In terms of section 12 (1B) of the SEBI Act, 1992 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 the Board in accordance with the regulations.

Regulation 3 of the Regulations permits only a 'Collective Investment Management

Company' having certificate of registration from Board to launch collective investment scheme.

Thus, only a company which has been granted certificate of registration by the

Board in accordance with the Regulations can launch or sponsor a collective investment scheme. In other words, for a collective investment scheme to raise money from the public it is prerequisite that the entity must (a) be a company and (b) registered with SEBI as a Collective Investment Management Company.

Therefore, the launching/ floating of the 'art funds' or schemes without obtaining a

certificate of registration from the Board in terms of the provisions of the Regulations

amounts to violation of the provisions of section 12 read with section 11 and 11AA of the SEBI Act and the Regulations. For such violations, appropriate actions, civil and

criminal, under the SEBI Act may be taken by SEBI against such funds/companies.