Church fined by SEC

[Teancum]

13 hours ago, Calm said:

I think it is possible it wasn’t falsifying, but more a declaration that the Church had met the minimum necessary amount of assets to move into a category where additional assets made no difference to paying and therefore logically didn’t need to be reported for that purpose, as the Church would pay the same whether they had &1,000,000 or $100,000,000.  It is the only way the change to “over $1,000,000” and the $1,000,000 makes sense to me.  The probability of any organization having exactly $1,000,000 in assets is too low I am guessing to make that a reasonable input in any of itself.  Plus I don’t see even the most arrogant church official thinking they can just decide for themselves whether or not the law applies to them, I don’t see a sovereign citizen type getting that high up before running into trouble.  However, $1,000,000 makes for a very reasonable boundary marker, so perhaps Budge or whoever filled out the forms understood the instructions to mean since they were paying the maximum amount (a percentage of assets valued up to $1,000,000), as long as they declared they maxed out, that was sufficient. I haven’t read the WP article itself, just quotes, so it’s hard to tell if this could be applicable or not (,and I have no knowledge of organizational taxes to know if reasonable or not as well.

While I think they deserve any penalty that is given out because ignorance is not a defense for breaking the law (we paid our fines without complaining when we found out that we should have filed a US tax return even though we had no “US income” the first few years we were in Canada), I would like to know more about why he thought it didn’t apply before choosing what I am going to judge his actions as….misreading/mishearing instructions like we had, not bothering to check at all, trying to avoid paying additional taxes, or whatever.

Sorry but you are incorrect.  There is a reason when an NFP files a Form 990 they are expected to accurately report their assets.  It is not acceptable to just willy nilly to put down whatever number you wish. I would not have signed that form as the preparer.

[ttribe]

In case anyone thought the initial picture (of the 2007 return) is an isolated incident. Here are some more:

[Calm]

4 hours ago, Teancum said:

Sorry but you are incorrect.  There is a reason when an NFP files a Form 990 they are expected to accurately report their assets.  It is not acceptable to just willy nilly to put down whatever number you wish. I would not have signed that form as the preparer.

What part am I incorrect on?  There were several assumptions about the reasoning behind their choice, would love to know where I went wrong.  I agree with your comment about it not being acceptable as I hope would be clear by my comment about paying penalties as ignorance of the law is not a defense imo if one could have easily done something to remove that ignorance.

[Calm]

4 hours ago, ttribe said:

In case anyone thought the initial picture (of the 2007 return) is an isolated incident. Here are some more

What about the missing ones?  Were they also the same way (empty, “1,000,000” or “over 1,000,000”) or were they accurate? (It makes more sense to me if my assumptions are correct if they kept doing it wrong than if they bounced back and forth.)

Edited July 7, 2023 by Calm

[ttribe]

52 minutes ago, Calm said:

What about the missing ones?  Were they also the same way (empty, “1,000,000” or “over 1,000,000”) or were they accurate? (It makes more sense to me if my assumptions are correct if they kept doing it wrong than if they bounced back and forth.)

These were passed along to me by a friend of mine. I'd have to go looking myself to fill in the blanks and client demands are taking up too much time today. Given the timing of the WSJ article (last week) I highly doubt they ever filled it out correctly in any of those other periods.

[Mark Beesley]

What’s the big deal? So the Church concealed its investments.  Members do not make investments in the Church, they make donations. SEC rules are essentially there to protect investors so they can go into an investment knowing of the likelihood that they will experience a positive financial return. The Church is not a financial investment tool for members. No member pays tithing or any other donation expecting some sort of financial return. Quite frankly, members do not need to know everything about Church finances. Members need to be transparent with the Lord about their own lack of faith. A faithful Latter-day Saint will pay his/her tithing and donate generously to the other funds the Church offers without worrying about what happens to that money after it is donated.  There are way too many ark-steadiers out there. 

[ChildofGod65]

On 2/21/2023 at 12:25 PM, Calm said:

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.  

It just feels that their intentions are being hidden from all of us and that makes me worry. Absolutely true Shell Companies have to exercise their own discretion and cannot be controlled by one central entity that is determining the mangement of the eq

[Diamondhands69]

7 hours ago, ChildofGod65 said:

Absolutely true Shell Companies have to exercise their own discretion and cannot be controlled by one central entity that is determining the mangement of the eq

In this case about 13f disclosures, the shell companies don’t actually need to have discretion. The purpose of the form is to disclose who HAS the trading discretion whether it is the shell company, another entity or if it is shared.
 

The church lied and documented on each form submitted that the shell company listed was doing the trading and proxy voting of shares. That was not true. It was the main company EP who was doing all of the trading and voting. 
 

 

Edited October 16, 2023 by Diamondhands69

[smac97]

7 hours ago, ChildofGod65 said:

Quote

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.  

It just feels that their intentions are being hidden from all of us

Whom are you referencing here?  Whose "intentions?" and that makes me worry.

7 hours ago, ChildofGod65 said:

Absolutely true Shell Companies have to exercise their own discretion and cannot be controlled by one central entity that is determining the mangement of the eq

I assume you are referencing "investment discretion" here.  Is that correct? If so, could you review my comments on that issue here and here, and then provide feedback?

Thanks,

-Smac

[smac97]

1 hour ago, Diamondhands69 said:

Quote

Absolutely true Shell Companies have to exercise their own discretion and cannot be controlled by one central entity that is determining the mangement of the eq

In this case about 13f disclosures, the shell companies don’t actually need to have discretion. The purpose of the form is to disclose who HAS the trading discretion whether it is the shell company, another entity or if it is shared.

I have previously commented on this point here:

Quote

Quote

Question 6

Q: What is "investment discretion"?

A: An institutional investment manager exercises investment discretion if: (i) the manager has the power to determine which securities are bought or sold for the account(s) under management; or (ii) the manager makes decisions about which securities are bought or sold for the account(s), even though someone else is responsible for the investment decisions. See Securities Exchange Act Section 3(a)(35), and Rule 13f-1(b) under the Securities Exchange Act.

A few thoughts on this:
...
3. "Someone Else" Language is Statutory: The statute cited in Question 6 above, 15 U.S. Code § 78c(a)(35), seem to substantiate this (emphasis added) :

Quote

A person exercises “investment discretion” with respect to an account if, directly or indirectly, such person (A) is authorized to determine what securities or other property shall be purchased or sold by or for the account, (B) makes decisions as to what securities or other property shall be purchased or sold by or for the account even though some other person may have responsibility for such investment decisions, or (C) otherwise exercises such influence with respect to the purchase and sale of securities or other property by or for the account as the Commission, by rule, determines, in the public interest or for the protection of investors, should be subject to the operation of the provisions of this chapter and the rules and regulations thereunder.

This is seemingly important because, per the SEC Order, the SEC found it significant

• that "Ensign Peak failed to transfer investment discretion to the LLC" (paragraph 10),
• that the "Investment Management Agreements" the LLCs executed "assigned discretion and authority to manage the securities portfolio to the LLCs" (paragraph 18),
• that the LLCs "never exercised investment discretion over the Church’s assets" (paragraph 19),
• that EPA "continued to manage the entire portfolio and at all times maintained investment and voting discretion over all the securities listed in the Forms 13F" (paragraph 27), and
• that the managers of the LLCs "performed no functions for the Clone LLCs outside of signing the Form 13F signature pages each quarter" (paragraph 21).

I am not sure what to make of these findings.  They appear to be intended to inculpate EPA and/or the Church, but the statute passed by Congress appears to allow "some other person" than the LLCs (such as EPA) to "have responsibility for {} investment decisions."

4. Shift from "Investment Discretion" to "Sole Investment Discretion": Per the SEC Order, the references to "investment discretion" start in the "Summary" section:

Quote

The Forms 13F that Ensign Peak filed in the names of these LLCs misstated, among other things, that they had sole investment and voting discretion over the listed securities, when Ensign Peak at all times retained discretion over all investment decisions. 

And in paragraph 27 of the Order:

Quote

Each Form 13F filed in the name of a Clone LLC misstated that the LLC had sole investment discretion for the securities listed, that there were no other managers for these securities, and that the Clone LLC had sole voting discretion over these securities. Even though the IMAs stated that Ensign Peak had delegated investment discretion, Ensign Peak continued to manage the entire portfolio and at all times maintained investment and voting discretion over all the securities listed in the Forms 13F.  

Note the shift here from "investment discretion" (the actual language of the statute passed by Congress) to "sole investment discretion," which is the phrase used twice in the SEC Order, including paragraph 27, which is pretty pivotal in terms of compliance because, again, the statute allows "some other person" than the LLCs (such as EPA) to "have responsibility for {} investment decisions."

So how do we explain this shift?  Where did the SEC get the "sole investment discretion?" 

And doesn't adding "sole" to the statutory text substantially alter the text itself?

How does the SEC reconcile its apparent requirement of "sole investment discretion" with the statutory text stating that "{a} person exercises 'investment discretion' with respect to an account if, directly or indirectly, such person ... makes decisions as to what securities or other property shall be purchased or sold by or for the account even though some other person may have responsibility for such investment decisions")? 

Is the requirement for "sole investment discretion" an editorial gloss/embellishment that not only goes beyond the statutory language passed by Congress, but even contradicts that statutory language?

We report, you decide!

5. "Sole Investment Discretion" as a Component of Filling out a Form: The SEC has provided guidance on how to fill out the 13F Form:

Quote

The Information Table – Columns 5–8

Question 44 (Updated: January 3, 2023)

Q: What should I enter in Column 5, "Amount and Type of Security"?

A: Generally, you will list the number of shares of a security here. For options, you will also enter either PUT or CALL, whichever is appropriate. Column 5 is where you actually indicate that the listing is an option because most of the column entries for an option refer to the underlying security, rather than to the option itself (i.e., Columns 1-5 and 7-8). For example, in reporting an option position, you would enter COM in Column 2 and list the CUSIP number for the underlying stock in Column 3. See Special Instructions 10 and 11.b.v to Form 13F [Adobe Acrobat^® (PDF) file].

Question 45 (Updated: January 3, 2023)

Q: What is sole investment discretion?

A: If you are the only entity managing the Section 13(f) securities reported on your Form 13F and you do not control (or are not controlled by) another reporting person, you have sole investment discretion. See Securities Exchange Act Section 3(a)(35), and Rule 13f-1(b). Enter the word SOLE in Column 6. See Special Instruction 11.b.vi to Form 13F [Adobe Acrobat^® (PDF) file].

For example, if you are an investment advisory firm reporting your aggregate holdings for all accounts under your management, you have sole investment discretion (even though the accounts may be handled by different individuals within your firm).

Question 46 (Updated: January 3, 2023)

Q: What is shared-defined investment discretion?

A: If you control another entity (or are controlled by another entity), you should report shared-defined investment discretion. This category includes parent corporations and their subsidiaries (e.g., a bank holding company and its subsidiaries), investment advisers and mutual funds that they advise, and insurance companies and their separate accounts. See Rule 13f-1(b) under the Securities Exchange Act. Enter the word DEFINED in Column 6. See Special Instruction 11.b.vi to Form 13F [Adobe Acrobat^® (PDF) file].

For example, if you are a bank holding company, you are required to file Form 13F even though you may not be directly involved in the management of Section 13(f) securities. Although your trust department or other subsidiary may handle that responsibility, you are deemed to have shared-defined investment discretion based on your corporate structure.

Take a look at Question 45: "If you are the only entity managing the Section 13(f) securities reported on your Form 13F and you do not control (or are not controlled by) another reporting person, you have sole investment discretion."  This seems to comport with the expectations of the SEC, but not with the statutory text (which, again, does not reference "sole investment discretion," just "investment discretion," and which discretion can - per the actual statute - be held by one party (such as the LLCs) "even though some other person {such as EPA} may have responsibility for such investment decisions."

Now take a look at Question 46: "If you control another entity (or are controlled by another entity), you should report shared-defined investment discretion."  Again, this seems to comport with the expectations of the SEC, but only because the SEC has apparently imported a requirement that is not part of, and perhaps even contradicts, the statutory text. 

And here:

Quote

Quote

It appears that the black-and-white definition of investment discretion in the US code literally says a person has investment discretion "even though some other person may have responsibility for such investment decisions."

Yes, it says that.

What it does not say, however, is "sole investment discretion," a phrase the SEC Order uses in two key parts, the first being in the first paragraph of the "Summary":

Quote

The Forms 13F that Ensign Peak filed in the names of these LLCs misstated, among other things, that they had sole investment and voting discretion over the listed securities, when Ensign Peak at all times retained discretion over all investment decisions.  

Per the statute, it seems like there is nothing actually wrong with EPA "retain{ing} discretion over all investment decisions."  And yet the SEC seems to be saying otherwise.

See also paragraph 27:

Quote

Each Form 13F filed in the name of a Clone LLC misstated that the LLC had sole investment discretion for the securities listed, that there were no other managers for these securities, and that the Clone LLC had sole voting discretion over these securities. Even though the IMAs stated that Ensign Peak had delegated investment discretion, Ensign Peak continued to manage the entire portfolio and at all times maintained investment and voting discretion over all the securities listed in the Forms 13F.  

Again, "sole investment discretion" is not in the statutory text.  It just ain't there.  And what is there ("investment discretion") seems to expressly allow for "some other person" to have "responsibility for {} investment decisions."  It may seem counterintuitive, but welcome to the world of federal legislation!

I would appreciate any input you have on the foregoing assessments.

1 hour ago, Diamondhands69 said:

The church lied and documented on each form submitted that the shell company listed was doing the trading and proxy voting of shares. That was not true. It was the main company EP who was doing all of the trading and voting. 

It seems odd that the Church would "lie" about this, particularly since it may not have needed to.

Thanks,

-Smac

Edited October 16, 2023 by smac97

[Diamondhands69]

8 hours ago, smac97 said:

I have previously commented on this point here:

And here:

I would appreciate any input you have on the foregoing assessments.

It seems odd that the Church would "lie" about this, particularly since it may not have needed to.

Thanks,

-Smac

Sec instructions for 13f are linked below.

Column six details discretion on trading and who has it. Conveniently in the instructions included in the form, details and definitions are provided for the person filling it out. This form literally cannot be messed up unless it is on purpose. Even then the SEC is generally very forgiving when it is a simple mistake as opposed to a planned deception. That is how fines get assessed. 
 

Roger Clarke who runs EP has his own investment firm. The 13Fs they file over there are textbook and they have been doing them longer than the church has. In the very beginning he is the one who pointed out this form (yes one because it was just EP) needed to be done. If it got done wrong, it was on purpose. 
 

As for definitions of discretion- every financial advisor knows what it is. We have to explain it to every client as paperwork (LPOA) is completed explaining our role in trading and the client granting us to trade the portfolio on their behalf. Discretion is a well known topic and the crew at EP is more than competent enough to do it right- they just chose to follow orders from the first pres and their boss instead. 
 

in the absence of clarity on a form, the SEC offers assistance in filling them out. 
 

https://www.sec.gov/pdf/form13f.pdf

 

im not sure why the church chose to falsify the forms. My thoughts are that they were adamant no one be able to tie the LLCs/ money to the church hence all the BS names and LLC registrations scattered all over the country. 
 

the main problem with this and it was chatter at my firm was whether or not the church was setting itself up to manipulate equity prices through matched trades which they definitely could do. They were involved in the GameStop short squeeze so the theory isn’t completely unfounded. 
 

hedge funds coordinate with each other all the time to manipulate share prices. With a dozen LLCs , the Church easily could have done it. Doesn’t seem to be any evidence pointing at a plot like that, but this is a way to set yourself up to do it. 
 

The link below is an SEC report on some people who used multiple accounts to manipulate stock prices. I include it only as an example of what the church could do. There are some similarities between the ensign peak setup and what these guys did with a similar concept. This is why the SEC goes after these things. 
 

https://www.sec.gov/files/litigation/complaints/2019/comp-pr2019-216.pdf

paragraphs 1-5 starting on page 2 is a brief synopsis and prob all anyone needs to read unless they want to read through 50+ pages of case details. 

Edited October 17, 2023 by Diamondhands69

[Analytics]

6 hours ago, smac97 said:

I have previously commented on this point here:

And here:

I would appreciate any input you have on the foregoing assessments.

It seems odd that the Church would "lie" about this, particularly since it may not have needed to.

Thanks,

-Smac

Regarding "sole investment discretion," I don't think that is a requirement of the SEC. Rather, that is what the Church represented on the 13F's. For example:

David Johnson represented himself as the Business Manager of Elkfork Partners LLC, located at 111 S.W. Fifth Avenue Suite 3150, Portland, OR, 97204.

It turns out that Mr. Johnson really didn't work for Elkfork Partners LLC in Portland Oregon. Nor did he work for Ensign Peak Advisors. Mr. Johnson was selected to be the "Business Manager" of Elkfork Partners LLC not because he had any skills to manage a $3 Billion investment portfolio, but rather because he has an exceptionally generic name that couldn't be traced back to his actual employer, which was the Church of Jesus Christ of Latter-day Saints. And he didn't do anything whatsoever to manage Elkfork Partners LLC or select their assets. 

Mr. Johnson's filing included this question:

"Provide a numbered list of the name(s) and Form 13F file number(s) of all institutional investment managers with respect to which this report is filed, other than the manager filing this report. [If there are no entries in this list, state “NONE” and omit the column headings and list entries.]"

Mr. Johnson answered "NONE."

https://www.sec.gov/Archives/edgar/data/1694584/000169458419000004/xslForm13F_X01/primary_doc.xml

Mr. Johnson is the one who said he had sole discretion, when the truth is he didn't have any discretion at all.

He could have filled out the form honestly, but he did not. The reason he didn't is pretty obvious: being honest on those forms would have allowed investors to trace these LLC's back to the Church, which would have defeated the entire purpose of creating the LLC's in the first place.

Edited October 16, 2023 by Analytics

[Diamondhands69]

53 minutes ago, Analytics said:

Regarding "sole investment discretion," I don't think that is a requirement of the SEC. Rather, that is what the Church represented on the 13F's. For example:

David Johnson represented himself as the Business Manager of Elkfork Partners LLC, located at 111 S.W. Fifth Avenue Suite 3150, Portland, OR, 97204.

It turns out that Mr. Johnson really didn't work for Elkfork Partners LLC in Portland Oregon. Nor did he work for Ensign Peak Advisors. Mr. Johnson was selected to be the "Business Manager" of Elkfork Partners LLC not because he had any skills to manage a $3 Billion investment portfolio, but rather because he has an exceptionally generic name that couldn't be traced back to his actual employer, which was the Church of Jesus Christ of Latter-day Saints. And he didn't do anything whatsoever to manage Elkfork Partners LLC or select their assets. 

Mr. Johnson's filing included this question:

"Provide a numbered list of the name(s) and Form 13F file number(s) of all institutional investment managers with respect to which this report is filed, other than the manager filing this report. [If there are no entries in this list, state “NONE” and omit the column headings and list entries.]"

Mr. Johnson answered "NONE."

https://www.sec.gov/Archives/edgar/data/1694584/000169458419000004/xslForm13F_X01/primary_doc.xml

Mr. Johnson is the one who said he had sole discretion, when the truth is he didn't have any discretion at all.

He could have filled out the form honestly, but he did not. The reason he didn't is pretty obvious: being honest on those forms would have allowed investors to trace these LLC's back to the Church, which would have defeated the entire purpose of creating the LLC's in the first place.

Amen. Every one of the business managers did the same thing. All of them lied and they knew it. Someone might say “ well the boss handed em a blank form and told them to sign it … bla bla.” 
 

anyone who signs a govt doc and they don’t know what it is and never sees it again should have at least a small inkling they are working for a corrupt organization. 
 

Great commentary!

Edited October 16, 2023 by Diamondhands69

[smac97]

47 minutes ago, Analytics said:

Regarding "sole investment discretion," I don't think that is a requirement of the SEC.

I encourage you to review my prior posts on this point.  "Sole investment discretion" is a phrase found in the SEC's materials, but it's not in the statutory text.  So it looks like the SEC does have it as a requirement (and one that possibly contravenes the statutory text).

47 minutes ago, Analytics said:

Rather, that is what the Church represented on the 13F's.

Again, you need to review my prior posts.  The statute, 15 U.S. Code § 78c(a)(35), defines "investment discretion," not "sole investment discretion."  Further, part of the statutory text allows for a person with "investment discretion" to "{make} decisions as to what securities or other property shall be purchased or sold by or for the account even though some other person may have responsibility for such investment decisions" (emphasis added).  That seems to sound like what the Church was doing with its LLCs.  The LLCs had nominal "investment discretion," while EPA had the actual "responsibility for such investment decisions."

This is potentially a big deal, and I would like to explore it.  The Chevron doctrine creates all sorts of room for administrative/regulator agencies to "gild the lilly" via embellishments to the statutory text.  This is one of the reasons why the Supreme Court is likely to address it, as I have previously noted here:

Quote

Are any of these people "accountable"?  Not really.  Victories against excesses, overreaches and abuses by the Administrative State are, sadly, few and far between.  It's no wonder, really, with regulatory agencies having the Chevron doctrine, with no substantive accountability for the bureaucrats, with the bureaucrats having largely bullet-proof job security and very nice salaries and automatic enrollment in one of the best retirement systems in the world, with no concern about legal liability or expense (the AG's office provides free legal advice, after all), and so on.

And here:

Quote

As you can see, I have some strong opinions about the Administrative State.  I come to this conclusion after having read quite a bit about it (not just about the SEC), and about the Chevron doctrine that has allowed its power to swell and fester.  

To further respond to Analytics' inquiries ("Would you also grant that same default presumption of basic honesty and professionalism to the public servants who work at the SEC?" and "Why don't you give the same benefit of the doubt to the SEC and to the public servants who work there?" and so on), I present another news item I just came across this morning, and which bolsters my concerns about the Administrative State (including, but not limited to, the SEC) : Hopelessly Compromised SEC Dismisses Dozens of Cases Due to Widespread Agency Misconduct

The Supreme Court will shortly be hearing two cases about the Chevron doctrine.  I am looking forward to what SCOTUS has to say about this state of affairs.

47 minutes ago, Analytics said:

For example:

David Johnson represented himself as the Business Manager of Elkfork Partners LLC, located at 111 S.W. Fifth Avenue Suite 3150, Portland, OR, 97204.

It turns out that Mr. Johnson really didn't work for Elkfork Partners LLC in Portland Oregon.

I don't think you can say that.

47 minutes ago, Analytics said:

Nor did he work for Ensign Peak Advisors.

Likely true, but irrelevant.

47 minutes ago, Analytics said:

Mr. Johnson was selected to be the "Business Manager" of Elkfork Partners LLC not because he had any skills to manage a $3 Billion investment portfolio, but rather because he has an exceptionally generic name that couldn't be traced back to his actual employer, which was the Church of Jesus Christ of Latter-day Saints. And he didn't do anything whatsoever to manage Elkfork Partners LLC or select their assets. 

Which items, if true, are not relevant as regarding the actual statutory text.

47 minutes ago, Analytics said:

Mr. Johnson's filing included this question:

"Provide a numbered list of the name(s) and Form 13F file number(s) of all institutional investment managers with respect to which this report is filed, other than the manager filing this report. [If there are no entries in this list, state “NONE” and omit the column headings and list entries.]"

Mr. Johnson answered "NONE."

https://www.sec.gov/Archives/edgar/data/1694584/000169458419000004/xslForm13F_X01/primary_doc.xml

Mr. Johnson is the one who said he had sole discretion, when the truth is he didn't have any discretion at all.

Again, the statute does not require him to have had "sole {investment} discretion," because that phrase was apparently fabricated by the SEC, and is not in the text.

The statute also appears to allow "some other person" to "have responsibility for such investment decisions."

As it turns out, the "None" designation on the 13f form may well have been the error that the Church acknowledged.  

47 minutes ago, Analytics said:

He could have filled out the form honestly, but he did not.

I doubt Mr. Johnson filled the form out.

47 minutes ago, Analytics said:

The reason he didn't is pretty obvious: being honest on those forms would have allowed investors to trace these LLC's back to the Church, which would have defeated the entire purpose of creating the LLC's in the first place.

Actually, I think it's more simple than that.  I think the Church set up this system years ago, based on legal advice, and the system was either originally problematic, or else it became during the intervening years.

The Church has a pretty good track record of complying with the law.  And given that it has such a healthy population of critics and opponents who are super-duper eager to paint the Church in the worst possible light, it has strong incentives to comply with the law (over and above its moral/religious obligation to do so).  That some of its employees erred in filling out 13f forms, apparently on legal advice, is regrettable, but not much of an indictment of the overall character and decency of the Church.

Thanks,

-Smac

[Analytics]

19 minutes ago, smac97 said:

I encourage you to review my prior posts on this point.  "Sole investment discretion" is a phrase found in the SEC's materials, but it's not in the statutory text.  So it looks like the SEC does have it as a requirement (and one that possibly contravenes the statutory text).

I know the SEC Order says, "The Forms 13F that Ensign Peak filed in the names of these LLCs misstated, among other things, that they had sole investment and voting discretion over the listed securities...Each Form 13F filed in the name of a Clone LLC misstated that the LLC had sole investment discretion for the securities listed, that there were no other managers for these securities, and that the Clone LLC had sole voting discretion over these securities..."

But that is simply stating what the 13F's stated. However, it does not mean that the SEC has some regulation that they must have sole discretion.

I did a quick search and the SEC's FAQ on Form 13F defines the terms "sole investment discretion" (Question 45), "shared-defined investment discretion" (Question 46), and "shared-other investment discretion" (Question 47). Question 46 says:

If you control another entity (or are controlled by another entity), you should report shared-defined investment discretion. This category includes parent corporations and their subsidiaries (e.g., a bank holding company and its subsidiaries), investment advisers and mutual funds that they advise, and insurance companies and their separate accounts. See Rule 13f-1(b) under the Securities Exchange Act. Enter the word DEFINED in Column 6. See Special Instruction 11.b.vi to Form 13F [Adobe Acrobat® (PDF) file].

For example, if you are a bank holding company, you are required to file Form 13F even though you may not be directly involved in the management of Section 13(f) securities. Although your trust department or other subsidiary may handle that responsibility, you are deemed to have shared-defined investment discretion based on your corporate structure.

https://www.sec.gov/divisions/investment/13ffaq

What is your basis for thinking that "the SEC does have [sole investment discretion] as a requirement"?

19 minutes ago, smac97 said:

Again, you need to review my prior posts.  The statute, 15 U.S. Code § 78c(a)(35), defines "investment discretion," not "sole investment discretion."  Further, part of the statutory text allows for a person with "investment discretion" to "{make} decisions as to what securities or other property shall be purchased or sold by or for the account even though some other person may have responsibility for such investment decisions" (emphasis added). 

That doesn't mean that David Johnson was being honest when he said he had sole investment discretion.

19 minutes ago, smac97 said:

That seems to sound like what the Church was doing with its LLCs.  The LLCs had nominal "investment discretion," while EPA had the actual "responsibility for such investment decisions."

There is no evidence that the LLC's even had nominal investment discretion. But even if they did, that isn't an excuse for reporting to the SEC that they had sole investment discretion.

19 minutes ago, smac97 said:

Again, the statute does not require him to have had "sole {investment} discretion,"...

Does the statue give permission to say false things on the report?

19 minutes ago, smac97 said:

The statute also appears to allow "some other person" to "have responsibility for such investment decisions."

Of course it does.

19 minutes ago, smac97 said:

As it turns out, the "None" designation on the 13f form may well have been the error that the Church acknowledged.  

The SEC Order says:

Each Form 13F filed in the name of a Clone LLC misstated that the LLC had sole investment discretion for the securities listed, that there were no other managers for these securities, and that the Clone LLC had sole voting discretion over these securities.

It sounds like you are conceding that they are right about this and that the Clon LLC's did in fact mistake this important fact?

19 minutes ago, smac97 said:

I doubt Mr. Johnson filled the form out.

Actually, I think it's more simple than that.  I think the Church set up this system years ago, based on legal advice, and the system was either originally problematic, or else it became during the intervening years.
 

If the Church's decision was in fact based on legal advice, could have they told the SEC that they were sincerely endeavoring to comply with the law and filled out the forms based on legal advice? My understanding is that this is a pretty good defense against fines. However, if the Church made this defense to the SEC, they'd likely be required to provide documentation of a lawyer actually offering this advice. What would happen to a lawyer that was on record advising a client to lie to the SEC?

19 minutes ago, smac97 said:

The Church has a pretty good track record of complying with the law.  And given that it has such a healthy population of critics and opponents who are super-duper eager to paint the Church in the worst possible light, it has strong incentives to comply with the law (over and above its moral/religious obligation to do so).  That some of its employees erred in filling out 13f forms, apparently on legal advice, is regrettable, but not much of an indictment of the overall character and decency of the Church.

 

Deliberately saying something that is clearly and materially false on a government form isn't something that came from legal advice. 

[bluebell]

Sorry to resurrect an old thread but I just saw this article by Andrew Chung (with Reuters) pop up on my yahoo news and I thought it might be relevant.

Supreme Court faults SEC's use of in-house judges in latest curbs on agency powers

Quote

 

WASHINGTON — The U.S. Supreme Court ruled on Thursday in favor of a challenge to the Securities and Exchange Commission's in-house enforcement of investor protection laws in certain proceedings, dealing a setback to the agency amid the heavy scrutiny by the justices of federal regulatory power.

The 6-3 ruling, a setback for President Joe Biden's administration, upheld a lower court's decision siding with George Jarkesy, a Texas-based hedge fund manager who contested the legality of the SEC's actions against him after the agency determined he had committed securities fraud.

The case involved Jarkesy, who the SEC fined and barred from the industry after determining he had committed securities fraud. He responded with a lawsuit challenging the legality of the SEC's system.

Jarkesy was supported in the case by numerous conservative and business groups, which long have complained about the regulatory reach of the federal "administrative state" in areas such as energy, the environment, climate policy, workplace safety and financial regulation.

Biden's administration had appealed a 2022 decision against the SEC by the New Orleans-based 5th U.S. Circuit Court of Appeals.

The SEC in recent years has faced a series of legal attacks even as the Supreme Court's conservatives show skepticism toward expansive federal regulatory power. The court in 2018 faulted the way the SEC selected its in-house judges. In 2023 rulings in cases involving the SEC and Federal Trade Commission, the court made it easier for targets of agency actions to mount challenges in federal court. The court has curbed the power of other agencies in recent years including the Environmental Protection Agency.

SEC critics have said the agency has an unfair advantage litigating cases before its home-turf judges rather than before a jury in federal court. The SEC, which enforces various U.S. laws that protect investors, pursued 270 new in-house proceedings in the fiscal year that ended on Sept. 30, compared to 231 in federal court.

However, since the Supreme Court's 2018 ruling, most of the SEC's administrative proceedings are now handled by the commission itself, with very few — as of March, just two — proceeding before an administrative law judge.

The SEC in 2011 began investigating Jarkesy, who founded two hedge funds with his Houston-based investment advisory firm, Patriot28 LLC. The funds had about 120 investors and roughly $24 million in assets under management.

An SEC administrative judge found that Jarkesy and his firm violated the Securities Act of 1933 and other U.S. laws including by misrepresenting the identity of the auditor of the funds and value of the holdings. The SEC then ordered them to pay a $300,000 civil penalty and Patriot28 to disgorge nearly $685,000 in ill-gotten gains.

The 5th Court threw out the SEC's decision. In addition to its conclusion about the right to a jury trial, the 5th Circuit found that Congress gave the SEC too much power to choose whether to bring cases in-house, and that job protections for its administrative judges make them too difficult to remove, infringing on presidential powers under the Constitution.

During November oral arguments in the case, conservative justices expressed concern that SEC administrative proceedings are conducted for certain charges, such as fraud, without a jury, when similar cases alleging fraud in federal court would have one.

Liberal justices said that existing Supreme Court precedent allowed Congress to leave regulatory enforcement to administrative tribunals without juries, and that Congress gave the SEC more power after the Great Depression of the 1930s and later financial crises to combat investor fraud.

The Supreme Court has restrained the power of federal agencies in major rulings in recent years. It is deciding multiple cases during its current term on the authority of agencies. The justices on May 16 upheld the Consumer Financial Protection Bureau's funding mechanism in a challenge brought by the payday loan industry.

The court is expected in the coming days to rule in other cases involving the Environmental Protection Agency and National Marine Fisheries Service.

 

I don't know enough about this article and the fines the church had to really know if the SEC was doing sketchy stuff during the church audit or if this is completely different than that.  

Anyone smarter than I know if it's relevant?

[LoudmouthMormon]

Also here:

https://www.scotusblog.com/2024/06/justices-limit-major-sec-tool-to-penalize-fraud/

Quote

The court ruled on Thursday that the Securities and Exchange Commission’s routine practice of imposing fines in its administrative proceedings, used to penalize securities fraud, violates the Seventh Amendment “right of trial by jury” in all “suits at common law.” Chief Justice John Roberts wrote for a 6-3 majority in Securities and Exchange Commission v. Jarkesy that the SEC cannot continue to handle this cases in house without a jury. The decision will have a far-reaching impact on dozens of federal administrative agencies that use similar processes.

It looks like (and I'm hardly an expert), that the SEC (and any other federal agency that operates this way) can no longer just hand out penalties whenever they say someone did wrong.  They now have to make their case to a jury, who needs to agree with them, before fines can happen.

I have no clue if that's what happened to the church or not.  

[Kenngo1969]

On 6/27/2024 at 12:27 PM, bluebell said:

Sorry to resurrect an old thread ...

No problem.  We believe in the resurrection.  (It's one of my favorite principles of the Restored Gospel of Jesus Christ.)

Quote

 

Alma 11

42 Now, there is a death which is called a temporal death; and the death of Christ shall loose the bands of this temporal death, that all shall be raised from this temporal death.

43 The spirit and the body shall be reunited again in its perfect form; both limb and joint shall be restored to its proper frame, even as we now are at this time ...

44 Now, this restoration shall come to all, both old and young, both bond and free, both male and female, both the wicked and the righteous; and even there shall not so much as a hair of their heads be lost; but every thing shall be restored to its perfect frame, as it is now, or in the body ...

 

I just had to throw that in.  

I, too, don't know enough about proceedings before the Securities and Exchange Commission to gauge the relevance of this case on the SEC's proceedings against Ensign Peak, but ...  A couple of times, I've come up on the losing end of things in nonjudicial proceedings.  The "good news" about such proceedings is that the usual rules of procedure, of evidence, and so on, that would apply normally in courts of law do not apply in agency proceedings.  The "bad news" about such proceedings is that ... the usual rules of procedure, of evidence, and so on that would apply normally in courts of law do not apply in agency proceedings.

 

[Kenngo1969]

This post is not legal advice, is general commentary and is the author's [albeit well-considered] personal opinion only, and does not create an attorney client relationship between the author and any other person.  Anyone needing legal advice should contact an attorney who is licensed to practice where the matter arose.  The author reserves the right to be wrong.  Should any of his readers and his interlocutors disagree with him, Vive le difference! and caveat lector.

I don't know enough to comment specifically about the SEC case or how it might impact any proceedings against the Church of Jesus Christ of Latter-day Saints, but, generally, rulings such as this apply prospectively rather than retroactively.  (You can imagine the can of worms that would be opened if every party who is dissatisfied with how an agency handled its case were able to get the case reviewed and, perhaps, a new finding issued ... Utter chaos.)  So, generally, the rule is, "That was then, this is now."  

Suffice it to say that a solid majority on the current Court really, really is skeptical of too much power being exercised by federal agencies, and the problem with the so-called administrative state is that, often, it combines powers that, in our system of government, are supposed to be separate.  Enforcing the law is supposed to be a function of the Executive Branch, while ensuring that the law is applied uniformly (at least, as uniformly as possible in an imperfect world) and fairly is supposed to be a function of the Judicial Branch, while making law is supposed to be a function of the Legislative Branch.

Previously, Congress (as much as such a disparate, fractious, cacophonous body is able to speak with one voice) has said, "We don't really have the time or the expertise to oversee every little thing done by agencies, so, administratively, we'll give you the power to make your own rules, to adjudicate violations of them, and to determine how those violations should be punished."  But, as I've mentioned, under the Constitution, that's a no-no.  Previously, the Court held that where Congress's intent on a certain matter is unclear, agencies are free to make their own rules, to enforce them, and to adjudicate violations.  That principle is known as Chevron Deference, named for the case that spawned it, Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 468 U.S. 837 (1984).

It looks like the current Court is poised to overturn Chevron, and may already have done so (I'm not sure.)  However one feels about the current administrative law regime  in which a particular agency is able to be legislator, prosecutor, and judge in its own case, it looks like the days of an agency like the Environmental Protection Agency being able to single out a private homeowner and saying (for example), "That puddle that forms in your yard after each hard rain?  It's a wetland.  [Plunking down a 20-pound three-ring binder on the table.]  Here's the list of rules with which you must comply," are numbered.

It looks like Congress is going to have a lot more work to do now ... an idea that carries with it its own set of complications.

Edited June 29 by Kenngo1969

[LoudmouthMormon]

Thanks for a data point @Kenngo1969!

5 hours ago, Kenngo1969 said:

the problem with the so-called administrative state is that, often, it combines powers that, in our system of government, are supposed to be separate.  Enforcing the law is supposed to be a function of the Executive Branch, while ensuring that the law is applied uniformly (at least, as uniformly as possible in an imperfect world) and fairly is supposed to be a function of the Judicial Branch, while making law is supposed to be a function of the Executive Branch.

Previously, Congress (as much as such a disparate, fractious, cacophonous body is able to speak with one voice) has said, "We don't really have the time or the expertise to oversee every little thing done by agencies, so, administratively, we'll give you the power to make your own rules, to adjudicate violations of them, and to determine how those violations should be punished."  But, as I've mentioned, under the Constitution, that's a no-no.  Previously, the Court held that where Congress's intent on a certain matter is unclear, agencies are free to make their own rules, to enforce them, and to adjudicate violations.

That roughly matches my understanding of things as well.  I've found it an offensively disgusting state of affairs, and I've been personally unhappy with it for decades. 

[The Nehor]

10 hours ago, Kenngo1969 said:

Suffice it to say that a solid majority on the current Court really, really is skeptical of too much power being exercised by federal agencies, and the problem with the so-called administrative state is that, often, it combines powers that, in our system of government, are supposed to be separate.  Enforcing the law is supposed to be a function of the Executive Branch, while ensuring that the law is applied uniformly (at least, as uniformly as possible in an imperfect world) and fairly is supposed to be a function of the Judicial Branch, while making law is supposed to be a function of the Legislative Branch.

Previously, Congress (as much as such a disparate, fractious, cacophonous body is able to speak with one voice) has said, "We don't really have the time or the expertise to oversee every little thing done by agencies, so, administratively, we'll give you the power to make your own rules, to adjudicate violations of them, and to determine how those violations should be punished."  But, as I've mentioned, under the Constitution, that's a no-no.  Previously, the Court held that where Congress's intent on a certain matter is unclear, agencies are free to make their own rules, to enforce them, and to adjudicate violations.  That principle is known as Chevron Deference, named for the case that spawned it, Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 468 U.S. 837 (1984).

It is less that Congress said they don’t have the time and more that they like to keep legislation vague in order to avoid political blowback. Some of it is also done in ignorance too of course.

In an ideal world what should happen is that government agencies with expertise should make recommendations to Congress as to what laws and penalties should exist and then Congress debates and votes on them. In practice it would just create more lobbyists competing with other lobbyists.