Art funds will no longer have a free run. Market regulator Securities and Exchange Board of India (Sebi) has made it clear that ‘art funds’ floated by various entities are ‘collective investment schemes’ that need a certificate of registration in accordance with the Sebi (Collective Investment Schemes) Regulations, 1999.

“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. Regulation 3 of the CIS Regulations permits only a ‘Collective Investment Management Company’ having certificate of registration from Sebi to launch collective investment scheme,” Sebi said in a circular. In other words, for a collective investment scheme to raise money from the public it is a prerequisite that the entity must be a company registered with Sebi as a Collective Investment Management Company.

However, some companies involved in the art business maintained that they don’t come under the Sebi definition of CIS schemes. Religare Head (Wealth Management Group) Amit Sarup said, “We welcome the regulation as it is a step in the right direction to regulate the art industry but having said that, the notification is meant for ‘collective investment schemes’ whereas our fund comes under the trust structure. Hence the notification is not meant for us.”. Religare recently launched its art fund called Pratham.

Copal Art Gallery founder Ajay Seth said, “We have a bank from which we help investors buy paintings and sell paintings, So clearly we do not come under the collective investment scheme, which first collects the money from the investors, buys the painting and then sells.” Copal Art Gallery has launched three art funds.

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