Church of Jesus Christ of Latter-day Saints issues statement on SEC settlement

SALT LAKE CITY (AP) — The Church of Jesus Christ of Latter-day Saints and its investment arm have been fined $5 million for using shell companies to obscure the size of the portfolio under church control, the U.S. Securities and Exchange Commission announced Tuesday.

The Church released the following statement on Tuesday, February 21, 2023.

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 (SEC).

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.

FREQUENTLY ASKED QUESTIONS

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.

“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,” Gurbir S. Grewal, the agency's enforcement director, said in a statement.

The church maintains billions of dollars of investments in stocks, bonds, real estate and agriculture. Much of its portfolio is controlled by Ensign Peak Advisers, a nonprofit investment manager overseen by ecclesiastical leaders known as its presiding bishopric.

The church has agreed to pay $1 million and Ensign Peak will pay $4 million in penalties based on the violation.

Federal investigators said for 22 years, the firm hadn’t filed required paperwork to disclose the value of some assets in violation of the Securities Exchange Act and agency rules.

Instead, they said, with the church’s knowledge, Ensign Peak filed the forms through 13 shell companies they created, even as they maintained decision-making power. They also had “business managers,” most employed by the church, sign the required shell company filings.

“The Church was concerned that disclosure of its portfolio, which by 2018 grew to approximately $32 billion, would lead to negative consequences,” the agency said in a statement announcing the charges.