A U.S. financial watchdog fined the Church of Jesus Christ of Latter-day Saints and its investment arm $5 million for using shell companies to avoid giving the public a clear view of a stock portfolio that swelled into the tens of billions of dollars.
The church agreed to pay $1 million, while its Ensign Peak Advisers paid $4 million, to settle the U.S. Securities and Exchange Commission's complaint that they failed to file forms disclosing the church's equity investments. Instead, Ensign Peak spread holdings among shell companies and misstated that it controlled their decisions.
"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," the SEC's enforcement director, Gurbir Grewal, said in a
The case focuses on regulatory disclosures, known as Form 13Fs, that are closely watched on Wall Street. U.S. rules generally require institutional investment managers with more than $100 million in applicable assets to file the reports every quarter, giving authorities and the public a snapshot of how a portfolio has changed. Outside investors sometimes copy or bet against the wagers.
More than two decades ago, the church became concerned that if Ensign Peak filed such forms in its name, that could lead to "negative consequences," given the size of the portfolio, the SEC wrote.
So the church and the investment manager created 13 limited-liability corporations to obscure the church's portfolio, making filings in their names, the regulator said. The church had knowledge of and approved the tactic, the agency said.
The church — widely known as the Mormon Church — and Ensign Peak didn't deny the regulator's allegations. The church said in a
The agency expressed concern about the reporting structure in June 2019, according to the church, and soon after Ensign Peak began filing a single report. Ensign Peak disclosed in its Form 13F that it managed more than $44 billion, with its biggest equity investments in Apple and Microsoft, at the end of 2022.
The Wall Street Journal reported earlier this month that the church was under SEC investigation.
Latter-day Saints are encouraged to give 10% of their income to the church to remain in good standing, a process known as tithing.
Excess tithes were invested by Ensign Peak, according to the SEC's complaint. Ensign Peak charged the church no management fees, according to the agency, and invested the funds, and their returns, into stocks, bonds and real estate.
Ensign Peak initially managed about $7 billion of church assets, of which "a significant percentage" consisted of securities subject to 13F disclosures, the SEC said. By the end of 2019, that portion had swelled to approximately $37.8 billion, according to the agency.
