The Securities & Exchange Board of India (Sebi) has threatened both civil and criminal action against companies that launch art funds without first registering with the markets regulator. Sebi has cautioned that an art fund is deemed to be a collective investment scheme (CIS) and that presently no entity offering such investments has been registered.
The Sebi advisory has stated that any art fund is considered a CIS, as defined by The Sebi Act, 1992. It also warns that schemes or funds have been launched by some entities without obtaining a certificate of registration in accordance with the Sebi (CIS) Regulations, 1999.
According to The Sebi Act, no person shall sponsor or cause to be sponsored or cause to be carried on a CIS unless he or she registers with the board in accordance with regulations, the regulator has stated. The Sebi advisory goes on to state that “for such violations, appropriate actions, civil and criminal, under The Sebi Act may be taken by Sebi against such funds or companies?.
The regulator has said that existing regulations permit only a collective investment management company that is specifically registered with the board to launch a CIS. ?Only a company which has been granted a certificate of registration by the board in accordance with regulations can launch or sponsor a CIS,? the regulator pointed out.
?Therefore, the launching or floating of ?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 Sebi Act and the regulations,? Sebi said.
The markets watchdog said it had issued its advisory in the interests of the public with regard to their investments in art funds. The aim of the regulator is to educate investors about such schemes so that they can avoid being duped by entities inviting investments in unregistered art funds.
