Unregistered art funds warned

Source:- thehindubusinessline

None of existing funds are governed by SEBI rules

Kolkata, Feb. 13 Securities and Exchange Board of India (SEBI) has said that “art funds” are characteristically nothing but a “collective investment scheme or CIS” as defined by the relevant provisions of the SEBI Act, 1992, which essentially requires registration with SEBI and needs to be governed by the regulations for such schemes.

In a note to the investors, SEBI on Wednesday said that none of such existing funds are registered with it and are not governed by its rules.

In terms of 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 the Board in accordance with the regulations”, the SEBI advisory said.

An art fund without registration amounts to “violation of the provisions” and may attract “appropriate actions, civil or criminal, under the SEBI Act”, the note said.

Registration

Market law experts told Business Line that such funds, which have already been launched, might seek registration, but it cannot be with retrospective effect. “Such registrations can only be with immediate effect. In other words, a person, who has invested in such a fund in 2006 or 2005, is not protected by the SEBI rules until registration”.

Interestingly, only a company can launch such a fund under CIS as a “collective investment management company.”

Mr R. Shah, Chairman of Edelweiss Capital Ltd, a listed entity, which advised Yatra Art Fund in its first tranche of money-raising exercise, told Business Line that Edelweiss was not involved with the fund itself. The management of Yatra, launched by Osian’s-Connoisseurs of Art Pvt Ltd, was not available for comment.

This fund, which came into existence three years ago, is reportedly structured like close-ended mutual funds and operated as a wealth management service, with a fixed unit value and a minimum investment figure.

Not taken note of

So far, SEBI had not taken note of such funds, which securitised art items as assets. Consequently, it also did not think of investor protection in such funds.

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