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Church fined by SEC


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Posted
Quote

The Securities and Exchange Commission's (SEC) Form 13F is a quarterly report that is required to be filed by all institutional investment managers with at least $100 million in assets under management. It discloses their equity holdings and can provide insights into what the smart money is doing in the market.

https://www.investopedia.com/terms/f/form-13f.asp

Posted (edited)
17 minutes ago, ttribe said:

The order itself repeatedly refers to "senior leadership." I'm not sure who that means, but it's certainly open for interpretation.

Under "Respondents" "1" "As referenced in this Order, “senior leadership of the Church” consists of the Church’s First Presidency and Presiding Bishopric."

Edited by MrShorty
Posted

Seems like it could be useful for customers to evaluate the quality of their investment service (does Ensign Peak even have clients besides the Church?) Or for other investors to track the location of various caches of securities.

Posted
4 hours ago, ttribe said:

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

I would not mind transparency but the reality is the same people who complain about the lack of transparency are the same people who will complain when the church is transparent.  They was be mad that the church is spending money on this, not spending money on that.  There is always a group of people who will complain no matter what that church does.  So for those who ask for transparency, I say good and when the church becomes transparent, they need to at that point shut up.

Posted
15 minutes ago, MrShorty said:

Under "Respondents" "1" "As referenced in this Order, “senior leadership of the Church” consists of the Church’s First Presidency and Presiding Bishopric."

Good catch. Thank you. I hadn't read all the detail yet.

Posted
6 minutes ago, carbon dioxide said:

I would not mind transparency but the reality is the same people who complain about the lack of transparency are the same people who will complain when the church is transparent.  They was be mad that the church is spending money on this, not spending money on that.  There is always a group of people who will complain no matter what that church does.  So for those who ask for transparency, I say good and when the church becomes transparent, they need to at that point shut up.

For any charitable organization, the transparency (IMO) serves two purposes: 1) notifying donors of the uses of their donations; and 2), compliance with applicable laws and regulations (501(c)3 with the IRS and disclosure rules with the SEC). I can't speak to the IRS compliance, but it appears (at least to me) that they failed on #1 and also #2 as it relates to the SEC.

I don't think any organization can avoid criticism from some segment of the population and I don't think it's reasonable to manage a significant element of your organization specifically to avoid criticism, alone. There are rules, follow them. Again, the ethical considerations are important and "avoiding the appearance of evil" applies to the organization as much as to its members. I think the Church stumbled in that regard.

Posted
8 minutes ago, smac97 said:

A few thoughts:

First, I think members need to avoid adopting the implication that the Church had nefarious motives.  From the Des News article quoted previously:

The reporting mechanism involving the formation of an LLC would have been fine "if Ensign Peak {had} transferred operational investment discretion to the LLC."  So either the Church received bad legal advice, or else the legal advice it did receive was not fully followed (as indicated by the failure to transfer "operational investment discretion" to the LLC).

Second, organizations make such structured decisions all the time, and they rely on legal advice when attempting to comply with legal complexities associated with compliance with statutes, administrative/regulatory agency requirements, etc.  Sometimes the attorney(s) involved fail to thread the needle, or sometimes the client fails to follow legal counsel.  It happens.  It appears one or the other happened in this case.

Third, I think the Church's stated basis for the LLC thing seems pretty reasonable:

Fourth, I respectfully disagree with bsjkki's comment above ("Setting up shell llc's is a very bad look").  Setting up LLCs is an entirely mundane, and generally quite prudent, business practice, asset management and protection strategy, and privacy strategy.  

Thanks,

-Smac

How is that you can take a genuine effort on my part to express sympathy for those who will struggle over this issue and turn it into some apologetic defense? That's pretty poor manners.

Posted
10 minutes ago, smac97 said:

So either the Church received bad legal advice, or else the legal advice it did receive was not fully followed (as indicated by the failure to transfer "operational investment discretion" to the LLC).

Does Ensign Peak or any church company have full operational investment discretion?

Posted
1 hour ago, ttribe said:

For any charitable organization, the transparency (IMO) serves two purposes: 1) notifying donors of the uses of their donations; and 2), compliance with applicable laws and regulations (501(c)3 with the IRS and disclosure rules with the SEC). I can't speak to the IRS compliance, but it appears (at least to me) that they failed on #1 and also #2 as it relates to the SEC.

I don't think any organization can avoid criticism from some segment of the population and I don't think it's reasonable to manage a significant element of your organization specifically to avoid criticism, alone. There are rules, follow them. Again, the ethical considerations are important and "avoiding the appearance of evil" applies to the organization as much as to its members. I think the Church stumbled in that regard.

The church should always comply with the laws.  No problem with that.  I think the church should be more transparent on how it does things.   Criticism is fine on legal issues but I think its pretty clear people will complain about other things that are not legal issues which get really annoying because the church is not giving X amount of money to their particular pet issue.

Posted

 

12 minutes ago, smac97 said:

, I respectfully disagree with bsjkki's comment above ("Setting up shell llc's is a very bad look").  Setting up LLCs is an entirely mundane, and generally quite prudent, business practice, asset management and protection strategy, and privacy strategy.  

Why is it prudent business practice?

Posted
9 minutes ago, ttribe said:

For any charitable organization

Is the Church a charity in the usual sense though? Isn’t a religious organization treated differently than other forms of charitable organizations?

Posted (edited)
8 minutes ago, carbon dioxide said:

The church should always comply with the laws.  No problem with that.  I think the church should be more transparent on how it does things.   Criticism is fine on legal issues but I think its pretty clear people will complain about other things that are not legal issues which get really annoying because the church is not giving X amount of money to their particular pet issue.

The same can be said for Apple, Home Depot, Bank of America, Nike, or any other entity. I just don't think mere conflict avoidance is a wise way to run an organization. Your mileage may vary, of course.

Edited by ttribe
Posted
Just now, Calm said:

Is the Church a charity in the usual sense though? Isn’t a religious organization treated differently than other forms of charitable organizations?

Under the 501(c)3 rules it is considered a charitable organization. Donating members can deduct from their taxes the charitable donations. In those regards, the church is a charity.

Posted
2 minutes ago, Calm said:

 

Why is it prudent business practice?

It can be used to protect assets from liability, for example. This is very frequently used in real estate transactions and estate planning. When it's specifically and intentionally used to obfuscate holdings from a regulator, that's hard to defend under virtually any circumstance.

Posted
2 minutes ago, ttribe said:

It can be used to protect assets from liability, for example. This is very frequently used in real estate transactions and estate planning. When it's specifically and intentionally used to obfuscate holdings from a regulator, that's hard to defend under virtually any circumstance.

I have been out of points or just get one and then run out again, so haven’t been repping you as much as I would like in this thread. Thank you for the info you have provided here and elsewhere.

Posted
1 hour ago, Teancum said:

So you think the attorneys just did this on their own without consulting at least the key management people at EPA?  

No, but it sounds like they were reasonably convinced that they (all that were involved) could do it and not get fined for doing it. That turned out to be wrong.

Posted
36 minutes ago, MrShorty said:

Under "Respondents" "1" "As referenced in this Order, “senior leadership of the Church” consists of the Church’s First Presidency and Presiding Bishopric."

Thanks, was about to say similar.  
 

I think the presiding bishopric should have to go to the mat and explain.

I just think you’d be hard pressed, with all they deal with, to think the quorum of the twelve and first presidency had/have anything more than a cursory financial meeting once or maybe a couple times a week.

I think the church probably needs to explain more, but looks like they’re deciding they’ll take the PR black eye and move on.

 

Posted
51 minutes ago, Calm said:

I agree for the most part, but even a layman can decide whether they want to make a risky decision when dealing with government or investments.  Even I have made that decision.  This is the bit that is very disappointing for me. 

With stuff like this, I never attribute malice when stupidity or, in this case ignorance, can be applied.

For sure someone made the decision they knew was wrong, which is why I’ve said someone should lose their job.  But I don’t accept it reached the highest levels of leadership.

Posted
2 hours ago, OGHoosier said:

The CAD acknowledged the risk of adverse regulatory interpretation. That is not the same thing as believing your actions to be illegal, no?

It is the same as believing that it could be seen as illegal by the SEC - the only opinion that matters.  It suggests that there was unclarity.  Instead of doing the right thing and seeking for clarification from the SEC, they chose to disregard the concerns of the CAD, and now they are dealing with the consequences.  Their approach to the warning voice of of the CAD were clearly wrong.   Whoever that decision maker was needs to lose their job.  Whoever the legal experts are that are counseling the brethren on this matter need to lose their job.  They failed at providing wise legal counsel on these issues, big time.  At the very least, the concerns of the CAD should have been made known to the brethren.  I wonder if that happened.  I wonder if the brethren disregarded the risks mentioned.  It seems like any legal counsel would have had an obligation to disclose vocalized concerns and potential risks to the brethren.   That is the only way that a person can save their own skin - by placing the decision making in the hands of someone above them.  It seems like any legal counsel would have wanted to save their own skin from any risk by placing the decision making in someone else's hands, so I'd be surprised if the brethren were not aware of the risk. 

Posted
2 hours ago, ttribe said:

Actually, they very clearly intended to conceal the general wealth of the fund. They likely believed their actions were legal, but whether it was ethical is clearly up for debate. The SEC stated - "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."

I'd be shocked if they were not aware of the legal risks as raised by the CAD .  If that information was not brought to the brethren to consider in part of their decision making process, somebodies head is on the chopping block. 

Posted (edited)

Assuming I'm reading it right,

 

The thing that gets me (and this is probably more an issue with US securities law), is that if they church had created 13 full ensign peak equivalents (not just shell companies) and split the investments across them, we wouldn't be having this discussion.

It would still be making it harder to see the full size of the church's investment, but the sec couldn't do anything.

Edited by JustAnAustralian
Posted
27 minutes ago, Calm said:

 

Why is it prudent business practice?

Setting up LLC’s is great. Until recently we leased a warehouse from a friend with an LLC set up for the warehouse and another LLC for his primary business. We operate with a single LLC with multiple brands. Setting up LLC’s to obfuscate and hide from reporting requirements may be common (I wouldn’t know), but it will never come off as prudent or above board. 

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