SALT LAKE CITY, Utah, Feb. 21, 2023 (Gephardt Daily) — The Church of Jesus Christ of Latter-day Saints and the financial group Ensign Peak Advisors Inc. have agreed to pay a $5 million dollar penalty for filing incorrect financial forms that “obscured the Church’s portfolio and misstated Ensign Peak’s control over the Church’s investment decisions,” according to a statement by the U.S. Securities and Exchange Commission.
Ensign Peak Advisors Inc. is “a non-profit entity operated by The Church of Jesus Christ of Latter-day Saints to manage the Church’s investments,” the SEC statement says. And rather than file the correct forms, Ensign Peak instead filed forms for shell companies, the news release adds.
“To settle the charges, Ensign Peak agreed to pay a $4 million penalty and the Church agreed to pay a $1 million penalty,” the SEC statement says.
“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,” the SEC news release continues.
“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. 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.
“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. The shell LLCs’ Forms 13F misstated, among other things, that the LLCs had sole investment and voting discretion over the securities. In reality, the SEC’s order finds, Ensign Peak retained control over all investment and voting decisions.”
Gurbir S. Grewal, director of the SEC’s Division of Enforcement, released a statement on the case.
“We allege that the LDS Church’s investment manager, with the Church’s knowledge, went to great lengths to avoid disclosing the Church’s investments, depriving the Commission and the investing public of accurate market information,” Grewal said in the prepared statement.
“The requirement to file timely and accurate information on Forms 13F applies to all institutional investment managers, including non-profit and charitable organizations.”
The Church agreed to settle the SEC’s allegation that “it caused Ensign Peak’s violations through its knowledge and approval of Ensign Peak’s use of the shell LLCs,” the SEC statement says.
To see a list of Ensign investments, click here.
Church statement
The LDS Church also released a statement Tuesday morning, saying it relied on legal counsel in an attempt “to maintain the privacy of the portfolio.”
It does not address why privacy was a goal.
The Church statement appears below:
“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.
“Investment managers who oversee a portfolio of public equities above a certain threshold are required to file Forms 13F with the SEC quarterly. These forms 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.”
The LDS also included a question and answer feature, which is copied below:
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. These forms 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.
