Grygo is the chief content officer for FTF & FTF News.
A settlement between the SEC and The Church of Jesus Christ of Latter-day Saints and its investment management company got lost in the media shuffle amid the overshadowing crypto-related enforcement stories.
Late last month, the SEC announced it had settled with Ensign Peak Advisers, a non-profit entity operated by the Mormon Church, and with the church itself. Ensign agreed to pay a $4 million penalty, and the Mormon Church paid a $1 million penalty.
Ensign, which oversees the church’s investments, failed to file forms “that would have disclosed the Church’s equity investments,” according to the SEC’s allegations. Instead, Ensign had shell companies file forms “that obscured the Church’s portfolio and misstated Ensign Peak’s control over the Church’s investment decisions,” according to the regulator. The SEC also alleged that the Church caused the violations.
“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,” according to the SEC.
“Ensign Peak continued to file Forms 13F through the Clone LLCs until February 14, 2020, when Ensign Peak filed a consolidated Form 13F for the quarter ended December 31, 2019,” according to the SEC’s order. The consolidated form for 2019 ” disclosed its management of 1,659 Section 13(f) Securities valued at approximately $37.8 billion.”
“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,” according to the SEC.
“The order finds 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,” according to the SEC’s allegations.
The SEC further alleges that the 13F Forms of the LLC organizations “misstated, among other things, that the LLCs had sole investment and voting discretion over the securities,” according to the SEC.
The accused “went to great lengths to avoid disclosing the Church’s investments, depriving the Commission and the investing public of accurate market information,” says Gurbir S. Grewal, director of the SEC’s Division of Enforcement, in a prepared statement. The Form 13F requirement “applies to all institutional investment managers, including non-profit and charitable organizations.”
With the conclusion of the case, the Mormon Church issued an official statement from its Salt Lake City headquarters, outlining its side of the case.
“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,” according to the statement.
“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,” according to the statement.
“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,” the statement continues. “We affirm our commitment to comply with the law, regret mistakes made, and now consider this matter closed.”
The Mormon Church logo
In a FAQ about the matter, Mormon Church officials say the “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.”
In addition, since 2019 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,” according to the statement.
The case serves as an interesting sign that even religious, non-profit, and charitable organizations could be on the regulator’s radar if they allegedly run afoul of the rules.
The full text of the SEC’s order can be found here: https://bit.ly/3kS12S8
Need a Reprint?