To Regulate or Not to Regulate

Cromwell Art Advisor NYC
Panelists Andrea Crane, private dealer, Noah Horowitz, director of Art Basel North America, Howard Spiegler, co-chair Art Law, Herrick Feinstein LLP, and panel moderator Melanie Gerlis.

Recently, I was invited to speak on a panel about regulation in the art word, entitled “Regulation, Would it Spoil all the Fun?” While the title was catchy, it implied that collecting art is exciting because a little bit of bad behavior is not only tolerated, but also inherently fun (as long as you don’t get caught). In preparing for the panel, I took the position that the art world is so many interconnected micro-markets, it’s not only challenging to regulate, but regulation would effectively shut it down.

Does the art world need a regulatory body along the lines of the SEC? The art world is called a “market” but first and foremost, it’s a community of artists who make objects. These objects, whether painting, sculpture or drawings, are not comparable to shares. Each art object has unique qualities that make it desirable. While photographs exist in editions and are therefore inherently tradeable, the photo market has not reached the monetary heights of the painting and sculpture market, which trucks in unique objects.

Cromwell Art Advisor NYC
Mark Grotjahn, UNTITLED (THREE-TIERED PERSPECTIVE), 1998, colored pencil on paper, 24 x 19 in. Lot 409 of Sotheby’s Contemporary Art Day Auction, November 18, 2016.

Collectors are passionate and fall in love with certain ineffable, unquantifiable qualities that they alone perceive. What appeals to one person might not appeal to another. Stocks are identical shares in a company, so the analogy that art is like a stock is simply not valid. How then should the art market be regulated?

The call for regulation stems from the crossover of auctions into the world of finance. The Mei Moses Index, created by two Stern Business School professors in 2001, tracks public data on auction sales over a period of time, analyzing performance. The index is inherently flawed because it uses data alone. If a work fails to sell, the index doesn’t take it’s condition into account. The opacity of the art world does not lend itself to raw data. Nevertheless, the language of financial investing and the language of collecting have converged, and yet the two markets are not compatible.

Cromwell Art Advisory NYC

If you take an investment approach to buying art, I recommend that you do your due-diligence. Understand deeply the market in which you participate. As an art advisor with 25 years of transactional experience, I know the people I do business with, I know the conditions in which I operate, and I am transparent about them. My goal is to act as a fiduciary for my clients, prioritizing their interests above all else. Self-regulation is the key for the true art professional.