SEBI in a tough spot: Are art funds collective investment schemes or not?
Moneylife Digital Team 03 December 2012

SAT orders SEBI to look into Osian's Art Fund following an investor’s complaint. The regulator had brushed off the complaint arguing that art funds do not come under its purview

In a new twist to the never-ending Osian's saga and its unfortunate investors, the Securities Appellate Tribunal (SAT) has directed market regulator Securities Exchange Board of India (SEBI) to re-examine a complaint filed by AK Muthuswamy in matters relating to refund from Osian's. The SAT order dated 29 November 2012 said, “We set aside the communication dated 31 January 2011 and direct the Board (SEBI) to re-examine the matter after hearing both the parties (complainant and SEBI) and in the light of the extant instructions on the subject”. It further asked SEBI to pass its “order and take a final view in the matter within a period of two months”.
 

Moneylife, in the past, has repeatedly highlighted the plight of Osian's Art Fund’s investors after they had great difficulty in getting their refund after the fund’s remarkable meltdown. In fact, SEBI has ignored the issue for far too long. Osian's investors have had the ignominy of suffering for too long with a regulator which has yet to take action on art funds, particularly Osian's. This prompted one of Osian's investors, Mr Muthuswamy, to file a complaint against SEBI which subsequently got rejected on the grounds that Osian's Art Fund did not fall under its purview. The complainant then approached the SAT to which it has ordered SEBI to look into the matter. SAT had specifically mentioned a high court order which categorically stated, “shall not bar the petitioner to challenge the order passed by SEBI, if so permissible in law, by filing an appeal or taking other remedies to address the grievance”. Now SEBI needs to respond within two months. Will SEBI act or let this one go? It is already bleating that a Madras High Court judgement makes it impossible to review its own order.
 

Moneylife, over the years, had been watching the drama closely and has been batting for investors. Neither the regulators nor Osian have bothered to help hapless investors.  Moneylife was the first to report on Osian’s problems (and subsequently everything that followed Osian). Following our reports, a few investors were selectively paid some part of their principal. The rest have been kept hanging for years with promises of payment. The returns aren’t as shocking as the SEBI’s apathy towards retail investors.
 

The Osian's Art Fund was hard-sold by bankers, mainly ABN Amro to clients and raked enormous fees (http://www.moneylife.in/article/abn-amro-customers-upset-over-their-osian-fund-investment/2634.html). The fund returns were not only poor but it has failed to keep its end of the deal—to return investors’ money. But the regulator did not bother. It only sent a show-cause noticed and utterly failed to act on it.
 

Osian's Art Fund managed to raise as much as Rs102.40 crore from 656 unit-holders across 39 cities, most of them high net-worth individuals (HNIs). The scheme used to declare NAVs showing 30% returns, but when it was time for redemption it was an entirely different story and a depressing one at that. The scheme was wound up on 10 July 2009, at which time Mr Tuli wrote to the investors that redemptions would be made over the next 120 days as per the terms of the redemption guidelines. Far from it. Three years later, the fund is yet to make good on its promises. Investors were kept in the dark and some were even discriminated.
 

A complete Moneylife coverage on the Osian's Saga can be traced to the following links:
 

Some unitholders still awaiting payment

Osian Art Fund delays payout
ABN AMRO customers upset over their Osian Fund investment
Osian Art Fund investors get part payment
Osian Art Fund: Art of a scam?
How SEBI failed to regulate the Osian Art Fund
Around 85 Osian Art Fund investors awaiting first payment
Osian Art Fund failed to live up to expectations says Tuli
ABN AMRO investors in Osian Art Fund still await first payments
Osian Art Fund organises auction to redeem fund
Osian’s new promise: Will pay back by 29th May

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