📃 SEC Order¶
Estimated time to read: 6 minutes
This heading is a link to the original document. Below are some excerpts with emphases, and some added commentary.
If you haven't already, check the summary of PR statements from both parties. The headings below reflect those in the document, if you'd like to follow along. I don't know how to implement "when you hear the chime, turn the page!" so this is the next best solution.
Summary¶
From 1997 through 2019, Ensign Peak Advisors, Inc. (“Ensign Peak”), an entity which manages the assets, including the investment securities, of The Church of Jesus Christ of Latter-day Saints (the “Church”), failed to file with the Commission certain required forms (“Forms 13F”) that would have disclosed the size of the Church’s equity portfolio to the Commission and the public. Instead, the Church and Ensign Peak created thirteen limited liability corporations (“LLCs”), including twelve similar LLCs (the “Clone LLCs”) with addresses located throughout the U.S., for the sole purpose of filing Forms 13F and preventing public disclosure by Ensign Peak of the Church’s equity securities holdings. The Forms 13F that Ensign Peak filed in the names of these LLCs misstated, among other things, that they had sole investment and voting discretion over the listed securities, when Ensign Peak at all times retained discretion over all investment decisions.
I don't think we can soften this to say "it's a misunderstanding, they were diversifying in case of a loss!" The sole purpose of the shell companies is to commit fraud.
Ensign Peak developed its approach to filing Forms 13F in the names of these LLCs with the knowledge and approval of the Church, which sought to avoid disclosure of the amount and nature of its assets. Through their institutionalized use of this approach for almost twenty years, Ensign Peak’s significant role in the securities markets as an institutional investment manager was not disclosed to the Commission, the markets, and the investing public as required by Section 13(f) of the Exchange Act and Rule 13f-1 thereunder.
Respondents¶
The Church of Jesus Christ of Latter-day Saints is a Utah corporation sole, headquartered in Salt Lake City, Utah, which was organized and operated to carry out the purposes of the faith . . . As referenced in this Order, “senior leadership of the Church” consists of the Church’s First Presidency and Presiding Bishopric.
First presidency had direct influence and control over Ensign Peak making these shell companies, to avoid publicly disclosing how much money they had.
This is the church’s money. The first presidency made these calls. Not “the church” in vague, general terms. Not a random functionary we can throw under the bus, to pin the blame on. The First Presidency. Not a seventy. Not an intern in the auditing department. The first presidency.
That means this started with Hinckley. All through Monson. Charitably putting it, Nelson inherited this problem. Don’t know how much we can justifiably pin the blame on him. For what it’s worth, he wasn’t in the First Presidency for either Hinckley or Monson’s leadership, so there’s a chance he didn’t know about it. I find that unlikely, but it is possible.
Ensign Peak Advisors, Inc. is a Utah nonprofit corporation headquartered in Salt Lake City, Utah. Ensign Peak is responsible for investing and managing the reserves of the Church. Ensign Peak is governed by a Board of Trustees, consisting of members of the Church’s Presiding Bishopric and the Managing Director of Ensign Peak.
Ensign Peak’s Managing Director is appointed by the Church’s First Presidency and reports to the senior leadership of the Church.
Not much room for plausible deniability here. Ensign Peak’s manager is assigned by the first presidency, and reports to the first presidency.
Just what are these “reserves”?
The Church created Ensign Peak in 1997 as an integrated auxiliary of the Church to manage the Church’s investment securities. Ensign Peak has no shareholders or members. The securities portfolio managed by Ensign Peak consists of what the Church calls “reserve funds” or “reserves,” which include U.S. equity and debt securities purchased with excess tithing, income and returns generated by Ensign Peak, and the assets of other Church integrated auxiliaries.
These are not operating moneys. They are reserves of "excess" tithing money. Why do they have excess tithing? Did we run out of poor people to care for? I will not be told that the church uses tithing money for charitable purposes, while simultaneously having any amount of "excess". I seem to recall an important fellow in the New Testament saying something along the lines of "For ye have the poor always with you; but me ye have not always." (1, 2, 3) Is it unreasonable to think that this means we should always have an immediate, urgent use for tithing money, such that it shouldn't ever reach an investment portfolio?
I’d say it’s safe to assume that this agency issuing this public document is a fair authority to say that that last sentence describing the securities portfolio is definitive. All Ensign Peak does is manage tithing money. It’s tithing money. One could argue that some of it is interest on income… based on tithing. That doesn't make it better. It’s still tithing money. It’s profit made off of tithing that I had been assured is used for charitable purposes.
Note on “integrated auxiliary”: That means it’s still part of the church, and has no obligation to submit 990’s or 501c3’s. Nothing independent about it.
Paragraph 4 says, in so many words, that any organization with over $100 million in securities needs to submit 13f forms.
Throughout its history, the securities portfolio Ensign Peak managed for the Church contained a wide range of equity and fixed income assets. At its inception, Ensign Peak managed approximately $7 billion of Church assets, a significant percentage of which consisted of Section 13(f) Securities. The portion of Section 13(f) Securities in the portfolio grew to approximately $37.8 billion by 2020.
Ensign Peak's inception was in 1997, lest we overlook that detail. “A significant percentage” of the $7b in 1997 were securities that right from the start should have been reported under 13f forms. Right from the beginning, at its inception, the church’s money in Ensign Peak was 70x over the minimum, and they never sent in those forms.
Not all securities require 13f form submission. Church has some of those assets. I’ve heard the claim (haven’t found solid info to back it up) that around 1/3 of the assets do, and here we have a quantifiable number of $37.8 billion. That’s $113.4 billion managed by Ensign Peak alone, assuming that figure is accurate.
If that number is inaccurate, meaning more or less, I can still get behind the idea that not all assets require 13f submission. This does raise the question, what other assets do they have? And with nearly $40 billion, how do they have the balls to ask me for my money?