Church fined by SEC

[bsjkki]

This was expected. SEC.gov | SEC Charges The Church of Jesus Christ of Latter-day Saints and Its Investment Management Company for Disclosure Failures and Misstated Filings

Edited February 21, 2023 by bsjkki

[ttribe]

I sincerely hope this prompts the Church to be more transparent with its finances.

[bsjkki]

1 minute ago, ttribe said:

I sincerely hope this prompts the Church to be more transparent with its finances.

I agree. Setting up shell llc's is a very bad look. 

[Calm]

Also 

https://www.deseret.com/u-s-world/2023/2/21/23602967/church-settles-case-with-sec-over-financial-reporting

I would love if whoever made this decision came clean on the reasoning, apologized and it was made clear (as in shared company policy) that is wasn’t going to happen again….I don’t see that as likely though.  

Edited February 21, 2023 by Calm

[bsjkki]

Church settles case with SEC over financial reporting - Deseret News

Church and Ensign Peak leaders received legal counsel, the SEC order and church statement said, that they could create a trust to own a separate limited liability company to file Forms 13F. That trust was formed in April 2001 and a single LLC filed its first disclosure, or Form 13F, in February 2003, the SEC said.

The SEC said that the LLC could do so only if Ensign Peak transferred operational investment discretion to the LLC, but the SEC alleged that it did not.

 

“Since 2000, Ensign Peak received and relied upon legal counsel regarding how to comply with its reporting obligations while attempting to maintain the privacy of the portfolio. As a result, Ensign Peak established separate companies (LLCs) that each filed Forms 13F instead of a single aggregated filing. Ensign Peak and the church believe that all securities required to be reported were included in the filings by the separate companies,” the church said in a statement released Tuesday.

[ttribe]

7 minutes ago, bsjkki said:

I agree. Setting up shell llc's is a very bad look. 

In my experience as an expert witness who is a Certified Fraud Examiner, the establishment of the shell LLCs would be used to show an intent to, at best, mislead users of the filings, if not to outright defraud them. They need to get their house in order on this, right away.

[bsjkki]

Entire church statement: 

The Church of Jesus Christ of Latter-day Saints and its affiliated investment manager, Ensign Peak Advisors, Inc., have settled a matter with the Securities and Exchange Commission (SEC).

Investment managers who oversee a portfolio of public equities above a certain threshold are required to file Forms 13F with the SEC quarterly, which publicly disclose the names of the securities and their values.

Since 2000, Ensign Peak received and relied upon legal counsel regarding how to comply with its reporting obligations while attempting to maintain the privacy of the portfolio. As a result, Ensign Peak established separate companies (LLCs) that each filed Forms 13F instead of a single aggregated filing. Ensign Peak and the church believe that all securities required to be reported were included in the filings by the separate companies.

In June 2019, the SEC first expressed concern about Ensign Peak’s reporting approach. Ensign Peak adjusted its approach and began filing a single aggregated report. Since that time, 13 quarterly reports have been filed in full accordance with SEC requirements.

This settlement relates to how the forms were filed previously. Ensign Peak and the church have cooperated with the government over a period of time as we sought resolution.

We affirm our commitment to comply with the law, regret mistakes made and now consider this matter closed.

[bsjkki]

Church Q and A

Q: Who is Ensign Peak Advisors?

A: It is the affiliated investment manager for the church.

Q: Who is the SEC?

A: The Securities and Exchange Commission regulates the United States securities markets. It has broad jurisdiction.

Q: What are Forms 13F?

A: Investment managers who oversee a portfolio of public equities above a certain threshold are required to file Forms 13F with the SEC quarterly, which publicly disclose the names of the securities and their values.

Q: Did the church know about the practices at Ensign Peak described in the order?

A: The church’s senior leadership received and relied upon legal counsel when it approved of the use of the external companies to make the filings. Ensign Peak handled the mechanics of the filing process. The church’s senior leadership never prepared or filed the specific reports at issue.

Q: Has the reporting practice that prompted the SEC cease-and-desist order now stopped?

A: Yes. In June 2019, the SEC first expressed concern about Ensign Peak’s reporting approach. Ensign Peak adjusted its approach and began filing a single aggregated report. Since that time, 13 quarterly reports have been filed in full accordance with SEC requirements.

Q: Did Ensign Peak fail to comply with SEC regulations?

A: We reached resolution with the SEC. We affirm our commitment to comply with the law, regret mistakes made and now consider this matter closed.

Q: When will the penalties be paid?

A: The penalties will be paid shortly to the U.S. Treasury.

Q: Where does the $5 million come from to satisfy the settlement?

A: The investment returns of the church will be used to pay the settlement.

Q: How are the church’s reserves invested?

A: Following the principle of preparing for the future, both near- and long-term, the church maintains diversified reserves, including stocks, bonds, commercial and residential real estate, and agricultural properties. All funds are invested solely to support the church’s mission.

Q: Why did this settlement take place now?

A: We have worked with the SEC for years to come to this settlement. We reached resolution and chose not to prolong the matter.

Q: Will this settlement impact Ensign Peak’s ability to continue to make investments?

A: No. With the announcement of the order, the matter is closed.

Edited February 21, 2023 by bsjkki

[Calm]

13 minutes ago, ttribe said:

I sincerely hope this prompts the Church to be more transparent with its finances.

It is a blow to trust they know what they are doing and will make the right choices.

[bluebell]

2 minutes ago, bsjkki said:

Entire church statement: 

The Church of Jesus Christ of Latter-day Saints and its affiliated investment manager, Ensign Peak Advisors, Inc., have settled a matter with the Securities and Exchange Commission (SEC).

Investment managers who oversee a portfolio of public equities above a certain threshold are required to file Forms 13F with the SEC quarterly, which publicly disclose the names of the securities and their values.

Since 2000, Ensign Peak received and relied upon legal counsel regarding how to comply with its reporting obligations while attempting to maintain the privacy of the portfolio. As a result, Ensign Peak established separate companies (LLCs) that each filed Forms 13F instead of a single aggregated filing. Ensign Peak and the church believe that all securities required to be reported were included in the filings by the separate companies.

In June 2019, the SEC first expressed concern about Ensign Peak’s reporting approach. Ensign Peak adjusted its approach and began filing a single aggregated report. Since that time, 13 quarterly reports have been filed in full accordance with SEC requirements.

This settlement relates to how the forms were filed previously. Ensign Peak and the church have cooperated with the government over a period of time as we sought resolution.

We affirm our commitment to comply with the law, regret mistakes made and now consider this matter closed.

So is the fine just for the reports filed prior to 2019?

[Calm]

4 minutes ago, bsjkki said:

Since 2000, Ensign Peak received and relied upon legal counsel regarding how to comply with its reporting obligations while attempting to maintain the privacy of the portfolio. As a result, Ensign Peak established separate companies (LLCs) that each filed Forms 13F instead of a single aggregated filing. Ensign Peak and the church believe that all securities required to be reported were included in the filings by the separate companies.

But why is what I want to know.  What benefit was seen as worth the extra effort.

Edited February 21, 2023 by Calm

[ttribe]

1 minute ago, Calm said:

It is a blow to trust they know what they are doing and will make the right choices.

I feel sympathy for members who will struggle with this outcome. Losing trust, any amount of trust, in the institution to which you've shown so much loyalty and devotion is a difficult experience.

[Calm]

4 minutes ago, bsjkki said:

and now consider this matter closed.

Wishful thinking, but my guess is they are going to act like it is.

[bsjkki]

1 minute ago, Calm said:

But why is what I want to know.  What benefit was given?

"The church said it wanted to maintain the privacy of its holdings. Some church officials said previously that they wanted to avoid church members following church investments as a roadmap for personal investing because they might not be appropriate to their circumstances."

[bsjkki]

3 minutes ago, bluebell said:

So is the fine just for the reports filed prior to 2019?

Yes. It sounds like they got legal advice and thought what they were doing was okay. But, because Ensign Peak maintained decision making authority for the LLC's, it was not okay. 

[Calm]

1 minute ago, ttribe said:

I feel sympathy for members who will struggle with this outcome. Losing trust, any amount of trust, in the institution to which you've shown so much loyalty and devotion is a difficult experience.

I think it would help if they explained why and it turned out to have a reasonable, if perhaps a short sighted justification…such as not wanting to make it appear the Church was as wealthy as it is so as to not upset people or so that members don’t make investment decisions based on what the Church does (I am uneducated in this stuff, so I am only guessing these might make sense, correct me if these don’t follow please).  A paternal attitude is going to backfire for many members, imo.

[Calm]

7 minutes ago, bsjkki said:

"The church said it wanted to maintain the privacy of its holdings. Some church officials said previously that they wanted to avoid church members following church investments as a roadmap for personal investing because they might not be appropriate to their circumstances."

I need to read more than I do right now…I am too willing to opine on stuff I am not willing to investigate first right now, lol.  My motivational drive is hibernating with most of the rest of me….my mouth never seems to hibernate though.

Business bores me, especially investments.

But at least I guessed right, lol.

Edited February 21, 2023 by Calm

[bluebell]

11 minutes ago, bsjkki said:

Yes. It sounds like they got legal advice and thought what they were doing was okay. But, because Ensign Peak maintained decision making authority for the LLC's, it was not okay. 

I’m glad to know that they fixed it when they became aware of the problem.  What more can we ask of any organization?

Edited February 21, 2023 by bluebell

[SteveO]

An oversight.  I’m more annoyed they had to waste $5 million paying a fine. 
 

I’d rather they not disclose their investments. Many members have shown repeatedly they suck with financials, and this board would be inundated with bitter morons who sunk their life savings into mirroring the church’s investments.

[Teancum]

35 minutes ago, ttribe said:

I sincerely hope this prompts the Church to be more transparent with its finances.

Don't hold your breath.

[Calm]

From the DeseretNews link

Quote

The order contained allegations not addressed by the church, but the settlement brings the investigation to an end.

It is unfortunate, imo, these allegations weren’t addressed.  Even if the reason given is very reasonable, at this point I think it would be better received if everything was covered.

Quote

The church said it wanted to maintain the privacy of its holdings. Some church officials said previously that they wanted to avoid church members following church investments as a roadmap for personal investing because they might not be appropriate to their circumstances.

Wait a second….rereading this, the wanting to protect members from making stupid decisions being the reason this happened is speculation by the writer based on older comments…which is the same thing I did, this is not justification supplied by the Church or Ensign.  Reasonable, but not confirmed as why.

Very unsatisfying.

Edited February 21, 2023 by Calm

[Calm]

5 minutes ago, SteveO said:

An oversight.  I’m more annoyed they had to waste $5 million paying a fine. 
 

I’d rather they not disclose their investments. Many members have shown repeatedly they suck with financials…

Consequences of being an adult.

[Teancum]

40 minutes ago, bsjkki said:

I agree. Setting up shell llc's is a very bad look. 

You think?  The only reason to do things like this is to hide things.  

Is this being honest in dealing with your fellow men?

[OGHoosier]

Pretty big L over at Kirton McConkie from the looks of it.

[SteveO]

7 minutes ago, Calm said:

Consequences of being an adult.

Yeah, well I’m sure the church and leadership would tire at having to explain for the millionth time why the Lord isn’t personally picking and choosing stocks when a ticker is down 15%, and Brother Jones is freaking out because he gambled with his rent money for the month.  I can see it happening all over the church.  What a mess.

Edited February 21, 2023 by SteveO