Mormon Church Settles SEC Charges for $5 Million
The Church of Jesus Christ of Latter-Day Saints and its investment manager, Ensign Peak Advisors Inc., has agreed to pay a $5 million fine to settle regulatory charges brought by the U.S. Securities and Exchange Commission.
According to the SEC, Ensign failed to file forms that would have disclosed the church’s equity investments, instead filing forms for shell companies that obscured the church’s portfolio and misstated Ensign Peak’s control over the church’s investment decisions.
The SEC also announced charges against the church for causing these violations. To settle the charges, Ensign Peak agreed to pay a $4 million penalty and the church agreed to pay a $1 million penalty.
The SEC’s order finds that, from 1997 through 2019, Ensign Peak failed to file Forms 13F, the forms on which investment managers are required to disclose the value of certain securities they manage. According to the order, the church was concerned that disclosure of its portfolio, which by 2018 grew to approximately $32 billion, would lead to negative consequences. To obscure the amount of the church’s portfolio, and with the church’s knowledge and approval, Ensign Peak created thirteen shell LLCs, ostensibly with locations throughout the U.S., and filed Forms 13F in the names of these LLCs rather than in Ensign Peak’s name.
“We reached resolution with the SEC. We affirm our commitment to comply with the law, regret mistakes made, and now consider this matter closed,” the church’s official statement says on their website. “We have worked with the SEC for years to come to this settlement. We reached resolution and chose not to prolong the matter.”
The SEC says that Ensign Peak maintained investment discretion over all relevant securities, that it controlled the shell companies, and that it directed nominee “business managers,” most of whom were employed by the church, to sign the Commission filings. The shell LLCs’ Forms 13F misstated, among other things, that the LLCs had sole investment and voting discretion over the securities.
“We allege that the LDS church’s investment manager, with the church’s knowledge, went to great lengths to avoid disclosing the church’s investments, depriving the Commission and the investing public of accurate market information,” said Gurbir S. Grewal, director of the SEC’s Division of Enforcement. “The requirement to file timely and accurate information on Forms 13F applies to all institutional investment managers, including non-profit and charitable organizations.”
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