Another area where SEBI is trying to protect the interest of the investors is art-fund. It was come to the knowledge of SEBI that most of the entities are operating the art-fund without having been registered with the SEBI. As per the SEBI regulations no entity can be allowed to start a schemes or funds without obtaining a certificate of registration in accordance with the SEBI CIS (Regulations) 1999. SEBI has cautioned that an art fund is deemed to be a collective investment scheme (CIS) as defined under section 11AA(2) of the SEBI Act, 1992. And that presently no entity offering such investments has been registered.
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 sections 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.
In Osian’s-Connoisseurs of Art Private Ltd Vs SEBI, in this case the Osian’s is a leading archive and auction house. On June 1st 2006, it announced the launch of a private fund called Osian’s Art Fund, worth over Rs 100 crore. The objective of the fund is to generate significant medium and long-term income and capital growth from a cohesive, historically driven portfolio of investment and management in contemporary fine arts from the Indian sub-continent. As a result the Osian Art Fund which was launched in 2006 has received a show-cause notice by SEBI in November 2007 asking as to why the Fund should not be regulated. This is the first fund winch was floating at that time. But as per the CIS Regulations, Osian Art Fund, which pooled investors’ money to invest in art, was supposed to be regulated by SEBI. But the Osian Art Fund was not registered with SEBI. As a result the SEBI has issued an advisory against unregistered art funds in 2008, and it allowed to hear the contentions of the party in 2008.
Along with that SEBI in its press release on February 13, 2008 in its official website stated that “Art Funds” are “Collective Investment Schemes” as defined under the SEBI Act. In that press release it further stated that “launching or floating of “Art Funds” or Schemes without obtaining registration from SEBI amounts to violation of the SEBI Act and Regulations. Appropriate actions, civil and criminal, under the SEBI Act may be taken by SEBI against such funds/companies.” In response to that press release SEBI has given another opportunity to Osian on September 5, 2008, to appear before it. But in November 9, 2009 the art fund was redeemed as per the redemption guidelines as shared with the unit holders in June 2009. The company further stated that it may refund the money back to its unit’s holders before December 2009.
 http://www.financialexpress.com/news/sebi-to-book-illegal-art-funds/272780/ (February 10, 2010).
 http://www.krcco.com/Newsletter%20-%20March%202008.pdf (February 10, 2010)
 http://www.suchetadalal.com/?id=f3e8c67c-13f3-6b57-4ae02af2fe81&base=sections&f, (February 14, 2010).