The Securities and Exchange Board of India, the stock market regulator, on Wednesday said that it would initiate action, including criminal case, against companies that operate art funds without its approval.

The regulator, in a statement, warned that the launching of art funds or schemes without obtaining registration amounts to violation and it could take civil or criminal actions against the erring funds.

Market sources said there are no estimates available on the number of art schemes in the market or the quantum of funds collected.

Art funds typically operate by pooling in money from select investors and use it to buy art objects that have huge appreciation potential in a short period of time. The art objects market is, however, unorganised.

"The analysis of the characteristics of art funds reveals these are collective investment schemes (CIS) and the SEBI Act states that no one can launch CIS without getting registered," Sebi said.

"Only a company which has been granted registration can launch a collective investment scheme to raise money from the public."