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LDS Church, investment fund charged with disclosure failures, misstated filings

Posted at 9:30 AM, Feb 21, 2023
and last updated 2023-02-21 19:18:36-05

WASHINGTON — The U.S. Securities and Exchange Commission on Tuesday charged the Church of Jesus Christ of Latter-day Saints and its investment fund with failing to file forms that disclosed its investments.

Ensign Peak Advisers Inc. is the title of the fund.

While failing to file the proper forms, the SEC also found that the Church instead filed forms for "shell companies that obscured the Church's portfolio and misstated Ensign Peak's control over the Church's investment decisions," according to a release announcing the charges.

The SEC said Ensign Peak has paid a $4 million penalty to settle the charges, while the Church paid a $1 million penalty.

In its order, the SEC claimed Ensign Peak failed to file the proper 13F forms during a 22-year period beginning in 1997 because the Church was worried that the disclosure of its $32 billion portfolio would "lead to negative consequences."

Ensign Peak created 13 shell companies to file the proper forms instead of using its own name.

Jeff Schwartz, who teaches securities law at the University of Utah, said he couldn’t find another example of investors hiding portfolios for 20-plus years.

“It's difficult to defend the church's conduct here, that they are not above the eyes, the law,” he said.

Hamilton College religious studies professor, Quincy Newell, explained why the Church itself would want to keep the sums in its billion dollar portfolio from becoming widely known.

“It was precisely that discomfort that people have with a religious organization having a lot of wealth that led the Church and its investment advisors at Ensign Peak to pursue the strategy that ultimately led to these charges by the SEC,” said Newell.

In 2019, a former employee of Ensign Peak Advisors asked the Internal Revenue Service to investigate whether the Church misused its tax-exempt status. However, the IRS has never commented on whether it has conducted such an inquiry.

“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,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement.

In a statement following Tuesday's announcement, Church leadership said it had relied on Ensign Peak legal counsel on how to fulfill its reporting obligations.

"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," the Church wrote.