1. Is The Art Market a Wild Horse Is The Art Market Under Regulated?
Judith L. Pearson Executive Vice President Mark Edward Partners
October 30, 2016

2. Art As An Asset Class Securitization of the art market
Art funds (WSJ 03/10/15)
Art used as collateral for loans with growing platforms ($15B+)
Changing valuation requirements from the IRS and USPAP
Complex Tax planning structures
1031 exchanges are common
Authenticity of the object
Ownership (chain of title)
Anti-money laundering (AML/ Know Your Client)

3. Art Market Title Risks Liens/Encumbrances Storage Claims
Import/Export Violation
Estate/Will Disputes
Divorce
Unauthorized Consignments
Bankruptcy Lien
First Right of Refusal Clause
Contemporary Theft
Evolving Definition of Theft and Fraud
Money Laundering
Tax Lien
Bank or Creditor Lien
Animate in and out
WPA Claims
Historical Theft
Donation vs. Loan
Mishandled Sales/Conflict of Interest
Income and Estate Tax . 3
UCC Lien

4. Market Solutions
The art and collectibles industry is the largest unregulated industry ($65B annual sales globally).
Multi-million dollar art transactions often close with little to no paperwork or diligence.
Transaction standards in the art world are currently treated unlike all other business transactions.
Due diligence is typically viewed from an art historical perspective.
The art industry’s idea of transparency relates to pricing rather than transactional transparency.
Top Collectors are advised by a myriad of professionals.
Market solutions are created by TEAMS of experts.

5. Market/Technology Responses To The Opaque Art Environment
Internet
20+ years ago connoisseurship was limited to paper files at institutional repositories with art historians only having access.
Today collectors have rich resources to perform research, but most collectors don’t have the fore thought or skill set to understand the opaque market.
Commercial Reactions
Risk Mitigation (financial and contractual engineering).
Risk Transfer (insurance solutions – title insurance, lender single interest, etc.).
Technology
Marking and tracking authentication (peptide mass fingerprinting (PMF), synthetic DNA.
Blockchain Technology (Deloitte ArtTracktive, Ascribe, Verisart, Monogram, Vastari, Everledger, etc.).

6. Blockchain Technology Risk Management
Scenario
Calder commissioned by Sears in the 1973
1994 Sears Sold Sears Tower sold
building was sold 4 times
2009 Willis purchased the iconic building
2010 Sears opted to trigger option to repurchase the sculpture
Solution
Smart Contract/distributed ledger

7. Questions & Comments