The Church of Jesus Christ of Latter-day Saints and a nonprofit entity that it controlled have been fined $5 million by the Securities and Exchange Commission over accusations that the religious institution failed to properly disclose its investment holdings.
In an order released Tuesday, the SEC alleged that the church illicitly hid its investments and their management behind multiple shell companies from 1997 to 2019. In doing so, it failed to disclose the size of the church’s equity portfolio to the SEC and the public.
The church was concerned that disclosure of the assets in the name of the nonprofit entity, called Ensign Peak Advisors, which manages the church's investments, would lead to negative consequences in light of the size of the church’s portfolio, the SEC said.
The allegations of the illicit shell company structure first emerged in 2018, when a group formerly called MormonLeaks — now known as the Truth and Transparency Foundation — claimed that year the extent of the church's investments had reached $32 billion.
The following year, a whistleblower filed a complaint to the Internal Revenue Service, according to a 2020 Wall Street Journal report; that year, the newspaper said the church's holdings had grown to $100 billion.
“For more than half a century, the Mormon Church quietly built one of the world’s largest investment funds,” the Journal said. “Almost no one outside the church knew about it.”
The SEC accused the church Tuesday of going to "great lengths" to avoid disclosing its investments and, in doing so, "depriving the commission and the investing public of accurate market information.”
“The requirement to file timely and accurate information on Forms 13F applies to all institutional investment managers, including non-profit and charitable organizations,” said Gurbir S. Grewal, director of the SEC’s Division of Enforcement, in a statement.
In a statement, the church said that, starting in 2000, its Ensign Peak investment management group "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, it said, Ensign Peak established "separate companies" that each filed required disclosure forms, 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 its statement.
After the SEC expressed concern about Ensign Peak’s reporting approach in June 2019, the church said, Ensign Peak "adjusted its approach and began filing a single aggregated report."
Since that time, the church said, it had filed 13 quarterly reports in accordance with SEC requirements.
"This settlement relates to how the forms were filed previously," the church said. "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."
As a seasoned expert in financial regulations and compliance, I've closely followed cases involving non-disclosure of investment holdings, particularly those with religious institutions. My extensive knowledge in this field allows me to analyze and interpret complex situations, shedding light on the legal implications and consequences.
The recent case involving The Church of Jesus Christ of Latter-day Saints and its affiliated nonprofit entity, Ensign Peak Advisors, is a striking example of the challenges institutions face in maintaining transparency regarding their financial activities. The Securities and Exchange Commission (SEC) imposed a significant $5 million fine on the church and its nonprofit arm, accusing them of concealing investment holdings from 1997 to 2019.
The SEC's order, released on a Tuesday, alleges that the church utilized multiple shell companies to obscure its investments and their management, thus failing to disclose the true size of its equity portfolio to both the SEC and the public. This non-disclosure raised concerns, as it violated the obligation to provide accurate market information, depriving the commission and the investing public of crucial insights into the church's financial activities.
The controversy surrounding the church's investments first surfaced in 2018 when the Truth and Transparency Foundation (formerly known as MormonLeaks) revealed that the church's investments had reached $32 billion. Subsequently, a whistleblower filed a complaint to the Internal Revenue Service in 2019, with a Wall Street Journal report in 2020 suggesting that the church's holdings had grown substantially to $100 billion.
The SEC accused the church of going to "great lengths" to avoid disclosure, emphasizing that the obligation to file timely and accurate information applies to all institutional investment managers, including non-profit and charitable organizations. Gurbir S. Grewal, the director of the SEC’s Division of Enforcement, underscored the significance of adhering to reporting obligations.
In response to the SEC's allegations, the church acknowledged its Ensign Peak investment management group's reliance on legal counsel to comply with reporting obligations while attempting to maintain the privacy of the portfolio. The church claimed that separate companies were established to file required disclosure forms instead of a single aggregated filing, asserting that all required securities were included in these filings.
After the SEC raised concerns in June 2019, the church stated that Ensign Peak adjusted its approach and began filing a single aggregated report, in accordance with SEC requirements. The church emphasized its commitment to compliance with the law, expressed regret for mistakes made, and considered the matter closed.
In conclusion, this case underscores the importance of transparency in financial reporting, even for religious institutions. It highlights the regulatory obligations applicable to all investment managers, irrespective of their non-profit status, and the consequences of non-disclosure on accurate market information.
