The United States House of Representatives is considering expanding the Bank Secrecy Act in order to make galleries and auction houses subject to federal regulation. And the entire art market is buzzing. But the rules of the art market aren’t always written by the government. Last month, the Art Business Conference hosted a panel discussion on Art Basel’s “Art Market Principles and Best Practices,” a set of internal regulations governing the conduct of galleries participating in the fair
This week, we bring you audio of that panel, along with a brief introduction. The discussion was moderated by Artsy Executive Editor Alexander Forbes and featured art advisor Elizabeth Szancer, gallerist Stefania Bortolami, and art lawyer Jo Backer Laird.
United States


00:00:05hello and welcome to the artsy contest I'm your host Isaac Caplan joined this week by executive editor Alexander Forbes has like this week we have something a little special for you guys Alex was recently on a panel where he discussed art market regulation I promise it's actually very
00:00:21exciting Alex can you maybe tell us a little bit about what the panel was there discussing what role you played on it is a moderate a panel at the art business conference in April the conversation centered around our market regulation but more specifically a set of principles and
00:00:39best practices that art Basel recently rolled out the announced it in November but it went into effect for selection for the Miami show which is this coming December and looking at how an organization like our Basel that has some five hundred galleries based in a hundred twenty six
00:00:55cities around the globe attempts to self regulate or provide some guidelines for the members to take place in our heart of it's the director America's of art Basel presented those guidelines and then I was joined by Elizabeth censor his and now to our adviser clients including Ronald louder
00:01:12and Stefani of borderline me a pound a gallerist here in New York as well as Joe layered who's a art lawyer she helped advise on these principles shells is the as counsel for the ADA which the industry group of American dealers and was formally the general counsel of
00:01:31Christie's so diverse set of backgrounds there on a fairly contentious issue in the art world and in the general interest media right sounds like if you're gonna talk about our market regulation these are the people to turn chat about it with and I think as you said this
00:01:47is this is it timely and contentious subject because the art market enjoys may be the wrong word but the art market enjoys the reputation of being kind of unregulated wild wild west fraught full of fraud and in money laundering and the conversation of how and if to regulate
00:02:06it and from where that regulation comes it sort of internal within the industry or is external by the government is continuing most recently in the form of proposed changes to the bank secrecy act at the US house is currently working on it which would add art dealers and
00:02:26auction houses to the bank secrecy act essentially requiring them to report suspicious transactions and this is the kind of regulation that the art market has long tried to avoid through self policing and obviously you know it's a long way from what gets drafted a house committee to law
00:02:47but this is all just to say that this conversation continues to be extremely timely and it wouldn't surprise me if you know in lobbying against maybe these regulations people point to sort of this self regulation steps being taken by something like these initiatives to apostle so there have
00:03:03been ups well if these kinds of initiatives in recent years one responding to the more litigious environment there are more lawsuits that are happening relating to art that are garnering headlines and public interest that you know the art market is is an easy place to beat up on
00:03:20it's a place where phenomenally wealthy people transact in fairly OPEC ways there's been an interest from the industry and trying to start these initiatives to prevent the government from imposing regulation that might get it wrong and thus negatively affect the outcomes for the industry as a whole I
00:03:39think if you look at some of the reactions from the kinds of people that were sitting at the art business conference they would be not dissimilar to the kind of reactions that you saw from the tech community after that Facebook can regenerate a congressional hearings unit it's it's
00:03:52still just not very well understood the art market in defensive people get outraged give something like the one in DB scandal where Jello is basically just a straight up laundering money stolen from the Malaysian government by buying paintings and then taking out loans on those works and that
00:04:07loan money was clean a totally that's not to say that those things aren't happening there's a ton of that we can't say exactly how much of that stuff is happening but I think the the interest in creating these kinds of initiatives is to say on the one hand
00:04:22those are out liars by and large particularly within a certain core group of the market in any industry you're gonna have people on the fringes in this one some of those people might be kind of at the core but if you look at the total number of transactions
00:04:36that are happening the vast majority of collectors one's got a hope aren't laundering money and the vast majority of dealers aren't selling fakes or swindling their artists and so I think these kinds of initiatives are one to protect the trade and to try to create some some more
00:04:53transparent standards and educate people on what those are and I think it's worth distinguishing between something like the bank secrecy act which is meant to prevent money laundering and you know these more internal regulations which leads to my understanding often are aimed at sort of the more banal
00:05:13but arguably more prevalent kind of fraud for lack of a better word where like someone sells a painting they don't have good title to or they do it is a fake or something like that and rarely will that result in like a department of justice investigation but it
00:05:30does sort of undermine the integrity of the market so that said I think is a good segue Alex like what actually ease in these are Basel self policing guidelines you're absolutely right said that the main thrust of these regulations are aimed at things that you know primarily hurt
00:05:49artists more than anybody else I'm one of the the key points is about paying your artist on time which sounds pretty elementary and in some respects is but as it's defined yet points out on the panel one of the hardest things that young galleries is you get all
00:06:06this money in but then you have to pay for your fair because you have to pay fifty percent of the money back to your artists and so it's easy to get side ways and you know fall down a slippery slope of mismanaged finances as you mentioned before there
00:06:19is a point around establishing clear title to works making sure that when you have the right to sell any work that you're selling that you're giving a written invoice fairly basic business stuff there is points around stone looted and legally exported art works and forgeries you probably shouldn't
00:06:38sell those if you want to be a reputable art dealer and then there's a second section that has more to do with actual criminal complaints so one of the points of doing this from our pals perspective was tuned up hold also just the integrity of the fair as
00:06:52a brand and create trust within their market place so it puts a little bit more stringent guidelines around if you have been even charged with some sort of crime directly relating to your business you can be suspended from the fares you can even be ex during the run
00:07:11of one and given a certain number of hours to pack up here booths but it's really more about you sharing kind of the the integrity of the art market is up held will put a panel discussion just one second but before we get there I think we should
00:07:22just kind of talk a little about maybe the limitations of these kind of guidelines what are some of the outstanding questions left unanswered and maybe where these self policing regulations fall short and I think the most obvious one is that art Basel is a group of five hundred
00:07:39dealers and a hundred twenty cities that sounds like a lot but those are probably the ones most likely to follow these guidelines already these are kind of statement S. truth of best practices that are already happening within their three fares walls by and large now you know we
00:07:56might see that there are a drop off of dealers that that weren't doing this or you know who knows what happens and there certainly galleries that have bad reputations in terms of paying our sometime but the larger opportunity and what is kind of unclear is how an initiative
00:08:12like this has any effect on the people who are probably have the least amount of access to this information maybe they don't even know what you're supposed to do and not supposed to do as a dealer Elisabeth talks about as a member of the association for professional are
00:08:26divisors similarly within her field that there's a lot of ambiguity and that some people just don't know either on the client side or on the adviser side what's expected of people we haven't figured out a good way to do as an industry is to create that knowledge sharing
00:08:41that opportunity for education and wider enforcement that has bite you know the fact that you can get pulled out of an art Basel fair or be eliminated from contention for their shows in the future is pretty significant for dealers who make a lot of their money at those
00:08:59three fares every year whereas other initiatives that have been out there in the past really it's like an opportunity for everybody who signs it to get around to Pat themselves on the back and there isn't really any way to enforce it how we got out to like the
00:09:12five ten fifty thousand however many thousand galleries there are out in the world and never mind auction houses in private dealers with something similar it's kind of an unanswered question alright well I think let's just jump right in without further ado here is the panel I think on
00:09:32the last point in the actual PDF it says a specific number of hours that they would have to vacate their booth which seems like quite the story if it were to happen but that I wanted to first start off as defining as your as the person who would
00:09:46be most directly %HESITATION applicability these best practices and get your reaction on %HESITATION this being implemented our Basel I know and you're also involved with the ADA and how many those experiences differ how you've seen these kinds of best practices applied in the past as well okay Sir
00:10:04I have a a medallion obviously but I have an American business %HESITATION and having a business here also means at least to me comply with the rules so at a mostly guests in this country signed if I do something wrong on the zone that no war and if
00:10:22and if we don't want that to happen so we follow completes the rules and I frankly I feel I feel that most galleries in the United States to %HESITATION because just simply it is too much checks and balances to to not make that happen the ones that dont
00:10:40maybe they don't end up being open for very long and they don't end up being our Basel that is so that I think it's %HESITATION very important too and part of the one of the committees of the eighty and when we look at %HESITATION galleries to admit to
00:10:58membership we talk about especially %HESITATION their relationship with consignors walk and criminals or do you know if you had any come complain criminal complaint %HESITATION %HESITATION against the gallery and if the page the artists have to pay the binder as you know what the general behavior and I
00:11:18think that that's %HESITATION extremely important as a as a business and we have to be we one day our business to flourish and I think the more people mis behave the the worse it will become and Joe having worked on both ends yes you know particularly with the
00:11:39art Basel initiative being global and the added complexities that added in any kind of key take aways from that process and understanding how to expand something and from the FDA regulations that you'd wear condoms specifically American context add to a more global context for the trade well it
00:11:55was different in a lot of ways but first of all I I think it's it's important to point out how they are the same both codes really talk about issues that are fundamental that are that are truths that ought to be self evident you don't sell things if
00:12:12you think they're fake you don't sell things if you aren't authorized to sell them I hear the things that things that ought to be the basis of every gallery I the the complicated factor or the complicating factors are with are doing it for art Basel is that it
00:12:32is first of all an international %HESITATION endeavor I and so there are a lot of different jurisdictions I handed the relationship between the organization and the galleries is very different then %HESITATION then the galleries to each other in the eighty eight eighty eight is a membership organization everybody
00:12:56is there for the purpose of essentially promoting the best practices and being and and being seen as a gallery that promotes the best practices I did it with art Basel it's a it's a it's a large group of galleries making a business arrangement with an organization that runs
00:13:17the shop I think as a result of that two things first of all I we don't %HESITATION we don't go in we don't go into %HESITATION it quite as much detail in terms of the enforcement I it really is a lot a lot more flexible in terms of
00:13:36the enforcement but I think given the jurisdictional reach and the and the the the legal context I think it made much more sense in in the art Basel case to do that the other thing is that we all are %HESITATION or eighty eight is in order is an
00:13:55organization that is made up of on a hundred and some odd art galleries just in the United States so that while the %HESITATION the art Basel list is is very straight forward and and really just states the the the ultimate nugget of conclusion art with the art dealers
00:14:18association we went into a little bit more detail are in part because we were weaving in US law online and in part because I mean for as an example of that we get into much more detail about the sorts of things that should be on a bill of
00:14:35sale and we've in the fact that %HESITATION that anything that is on the bill of sale that is material is a it is deemed under US law under the uniform uniform commercial code to be a warranty said that specifically and I and the other thing that we were
00:14:57able to do is to we've been on issues that had been that had arisen in the market in the United States as an example I would be %HESITATION that on Oct excuse me and gallery should not %HESITATION should not consigned to an auction house works that are being
00:15:19consigned really for the purpose of the gallery buying them back buying them at an increased price that was something that happened that was something that happened some years ago and the people were where we say in another section if if another member comes to use at a foot
00:15:39at the fair or otherwise and says there may be an issue with this work of art I vat that a member is supposed to %HESITATION respond on the end welcome the information that is they're not supposed to their struck them off back but I and where we are
00:16:00questions were raised about a work of art that was at the nobler gallery door in on a on an eighty eight art show so these are things that if any body in the US and the U. S. collector looks at it they say okay date those guys now
00:16:16also the flexibility and then I will be quiet the flexibility of the enforcement process a process really does give us the ability to step in before or even without a a a criminal issue out when it became clear that the galleries who had who had consigned things to
00:16:38Christie's in order to bid them up had engaged in that practice the association was able to move on and to effectively ask the gallery to leave of course the same thing happened with the nose look at it's I guess now it's far from the first effort as we
00:16:54can talk about a couple of them but there was also last year the responsible art market initiative that involved a number of actors across the industry at and in twenty twelve there the Basel %HESITATION instead of governance our trade guidelines and you know one of the most common
00:17:09criticisms that I've gotten has been put forth against these kinds of initiatives is that there isn't that much bite to them you know it's a opportunity for us all to get together Pat ourselves on the back and say that we were the good ones and but how how
00:17:24important from your perspective %HESITATION or from the perspective of our Basel is it that these kinds of regulations have bite to them that that there are consequences and and I guess across the the panel would be curious to hear how and how enforcement can be taken forth a
00:17:42bit more and and I guess pull back on some of those criticisms yeah I mean I I I I can address I mean the most fundamental aspect of it that I think you know our hope is that it has by it especially with regard to the criminal items
00:17:55under consideration and I think a large part of our thinking there is that in the end %HESITATION you know the galleries that serve on our selection committees are there because their their stuff on his colleagues and these are people that work night and day to build up programs
00:18:08of artists on the primary market that have gone in doubt working with artists states center on secondary market and that's their core competence and with regard to issues around money laundering or dealing in fraudulent items there's a separate mode of %HESITATION legal expertise that's truly required and frankly
00:18:27it's above and beyond the core competence what are dampened dealer network and so in those instances it man as as I spelled out in the end I mean we have every ability to to withhold that mission to certain galleries and and should we become aware of them in
00:18:42such a process is the German it over the course of one of our shows we can remove them from the fair I think the code of conduct more broadly %HESITATION you know should hopefully help to inform all of those galleries that you know the great journalists there many
00:18:58of whom are sitting here writing on the the woes of small and mid market galleries many of him %HESITATION don't you know that they have in their non operating in in in a market like this with opportunities like we have did it transparently talk about these things are
00:19:11not as aware of all of these varying standards and we're trying to to raise the bar of professionalism industry wide and we felt in the end that is art Basel we have a unique ability to put something out in the world and and again to own that responsibility
00:19:24that we have %HESITATION in our organization that attracts something in excess of two hundred fifty thousand people are coming through the halls of our three shows each year on the and and in in time we hope that that will raise the level of professionalism and give greater confidence
00:19:40to the buyers and sellers that are buying from galleries and that are part of our platform I guess you know that does also bring up this question of perception versus reality and we say that %HESITATION within this group or a you know within even our puzzle galleries there's
00:19:53probably a large amount of buying into the best practices as you get more into the expanded that art market the globalized our market maybe this variance there obviously in the general interest media there's been a lot of interest in covering these big legal cases and probably prompt some
00:20:10of these efforts as well rancherias from each of your perspectives you know how how much criminality or how many bad actors are there out there is there a kind of availability diets of the headlines verses at him today one you know captain wanted to talk yeah on you
00:20:29know if you could be the reason for these sorts of best practices codes is is because he day you you really do want to protect the market up from the bad guys and there are bad guys I and and you know is an attorney in the area sometimes
00:20:47the things that he he or somebody has done leaves you kind of breathless I mean you just got a really you think that's okay %HESITATION Sir but I but I think that the that the bad guys among high among galleries and auction houses are really are the minority
00:21:07I mean they really really are the minority and that most galleries %HESITATION it most galleries get into the business because they love hard day %HESITATION they they have no interest in swindling somebody it's hard to make a a percentage but it really they they are not the majority
00:21:28and the problem is as in every other walk of life that the bad guys tend to get the publicity I did I did I would always on it a quick story from when I was at Christie's and we returned antiquity I that had been that is that we
00:21:49were told had been stolen we absolutely gave it right up on and there was no question about it we cooperated fully and I live in the US attorney the assistant US attorney said well when we have our press conference were going to say that Christie's really cooperated I
00:22:08said thank you very much and I promise you that in the New York times over the weekend the headline will be Christie's tries to sell stolen property and it was and it was so that's a bad stuff that gets more headlines for art advisors it's a whole different
00:22:27ball of wax because today there are no regulations are certifying the exams serves for one to be qualified to call oneself and I'd advise it seems to be mostly used term by many %HESITATION so you know as us or vice president of the association of professional organizers we
00:22:55really try to welcome to membership really you know the best field we really try our best to vets every possible member of the the best we can to see how their practices to fit in with our requirements which is really you want to have a an objective art
00:23:17adviser who only has the interests of his or her clients in mind and is only paid by those clients and doesn't have inventory and can be completely objective so it's a it's a little bit of a battle for us and this is not as clear cut I think
00:23:37is it is maybe for for for gallerist %HESITATION but every time we think well do we have to ease up on our requirements and in the art world today is so fluid we always come back to know we have to stick to our guns as trees actually if
00:23:55you could just list out some of those principles because they can't be interesting take to go through it you perhaps surprising some of what your guidelines are verses and some of the some of the more typical conceptions when our defenses well you know it is sort of briefly
00:24:12I I think that we focus on so what I'll call the three ease him out like that education experience you know experience and expertise and also ethical practices I think that those are clearly very very important of for someone to become a member of the association of professional
00:24:38organizers one has to have had proven experience the projects and the and certain Klein hence at certain level for a minimum of five years and that's difficult that's demanding into it they were moved we focus now and and all these people who said well I've left the auction
00:25:00house and now I'm advised I I've been working forever I should be a member of your organization %HESITATION we don't know what their practices occurring to me and maybe it was five years we can figure that out how they're doing I do they fit it's sort of a
00:25:15you know our our requirements so %HESITATION so as I said before EDC want somebody that is sort of educated that has a background or related background in art historical background that understands the business of art %HESITATION did also I has gained some expertise that really knows what they're
00:25:38talking about and if they don't they know how where how to get that expertise to other professionals in the art world to go to other specialists you work with others I and as I said these ethical practices were you Joan told inventory you don't ever get paid by
00:25:58anybody other than your client you don't sort of double dip and if I it's all you don't have any commission from vendors and the kick backs and if there is some other mode of payment it's truly transparent and agreed upon ahead of time even in writing with your
00:26:18client the client has to know exactly how he or she is being built and for what and it's very clear %HESITATION people charging different ways it can be a commission basis it can be a retainer can be hourly fee but it's all very clearly clearly outlined and that's
00:26:36very very important and you want to have an objective adviser no but I you know you've put for these gallery best practices but I'm sure there are other determinations that have to get native at who gets to come to our Basel in when you know that some of
00:26:50the things Elizabeth was just mentioning is that something you guys take into consideration when evaluating that the many people that call themselves a visor by was sitting here quietly appraising her %HESITATION there's no term in our field that's more abuse than art adviser I mean I think that
00:27:06was some time it was the word curator but I think our advisors trump easy to become a gallon he should %HESITATION you know and I think this is a big challenge for us and you know we get bombarded and were now in Basel that now like the amount
00:27:20of emails that week at %HESITATION by legitimate but also illegitimate people asking and and not they don't ask they never ask they demand has %HESITATION %HESITATION VIP credentials for them and and their mysterious clients and you know there's that were not involved in commercial transactions in the end
00:27:37you know we are a platform so there's limited amount of information that even art Basel can possibly know about the various people that are coming to our shows but the more %HESITATION the adviser community %HESITATION can comply with with a lot of what you put forward which is
00:27:52rings very true and and similar to what we tried to articulate actress is why we in the end decided to put in you know that this line of of putting you know creating written agreements %HESITATION settings are clearly spelled out I mean again as as a best practice
00:28:08%HESITATION is is a good thing %HESITATION and and and and if we can do that on a global basis it would be a great thing if there's some way for our galleries when they're sitting in their booth at a show to know somebody is you know an APA
00:28:21a cardholder number I mean I think that that would be one further way of of of feeling that in people that are walking the halls of the show you know young galleries we were just in Hong Kong for our show and in Asia young gallery from Taiwan or
00:28:33Indonesia has no idea who were really great you know New York art advisor they have no clue they have no ability %HESITATION and it's an ability that they learn and they train over time to get to know more about who these people are who is legitimate who's his
00:28:48going to be wasting their time but I mean it's it's something that we as an organization absolutely would support and and it comes up regularly I wanted to add something in terms of %HESITATION from the point of view of a gallery when I meet someone new collector as
00:29:03sometimes they just have to collect and they always ask me no because so many galleries to choose from so much are to choose from how do you choose what sometimes I tell them to get an octave vice otherwise I say you know buy for my daughter who for
00:29:19example is in our Basel because that says what about %HESITATION already standard on the Norfolk out it's in about as being vetted at least by their colleagues and I also saved because I'm in our Basel so I'm really trying to say buy from him for me %HESITATION it's
00:29:40you know there is an amazing amount you you can spend a lot of money buying art that is really worth absolutely nothing from galleries that we never get into our Basel and our is six phone it's not cheap you know you can easily spend a hundred and fifty
00:29:56thousand dollars on an artwork artwork %HESITATION that will has no time to somebody any value at all the moment it gets out of like out of its extraordinary so it's I think all this is important and one thing that came up at when we're discussing head of the
00:30:12panel was that a lot of times when people go against some of these best practices particularly when it gets into paying artisan tradition a duty towards our artists at a lot of it comes down to financial pressure and you know I know and and clear support this year
00:30:27she highlighted that the ratio of galleries opening to that closing its actually that fewer calories opening than ever before and Stefani add to what extent particularly for younger galleries that and you know when people are just starting out that financial pressure and some of the new norms if
00:30:45the art market whether that's handshake deal terms I can fall through or and the lengthy payment %HESITATION Ross says they can you know be essentially an interest free loan over months or even years %HESITATION is at cross purposes with some of these best practices or at least young
00:31:05galleries failed to follow them well the main pitfall a thing for young daughter is is %HESITATION to look in your bank account and you see an amount to anything on my god I got all this money without really realizing that the amount that you actually have a publicist
00:31:23third of that because you have to pay our fair meals it to be the artist yet to paying all these things are coming up the next day one not business people you know we love art I would most of us studied art history %HESITATION or where artists and
00:31:40you know that for the coming from the from the creative side so that the business and always a business and it needs to have a Jackson and all that stuff so talking to someone who if you can afford a business manager that's great if you can not talking
00:31:57to someone who can help you learn the basics that's a goal for this week's episode thank you so much for listening and thinking to the art business conference let's use that audio as tollways if you have comments or feedback we'd love to hear from you Judas in the
00:32:15mail podcast at darkness if you haven't already please remember to rate and subscribe to the podcast on iTunes or wherever you get your podcast help others find show our producer this week since I don't know misperception helped write a thrill in turn the theme music is by broke

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