The Church of Jesus Christ of Latter-day Saints and its non-profit investment arm Ensign Peak Advisers Inc. recently agreed to pay a $5 million fine. This action settles charges by the SEC that the Mormon church hid ownership of its $32-billion stock portfolio from the public.
The scheme
The SEC accused the church of using shell companies to mask its growing investment in public companies between 1997 and 2019 because it feared it would cause bad publicity for the religious institution. Even though church employees ran many, the shell companies claimed to operate independently when filing mandatory forms.
A former Ensign Peak employee blew the whistle on the shell companies in 2019.
Religious organizations do not get a pass
The SEC has fined other religious organizations in the past, but this action was unusual because it was against one of the largest churches in the U.S. While some attorneys caution asset managers against hiding their association with religious institutions and charitable organizations, the clients often prefer to keep a low profile: Many believe that investing in publicly traded stock does not reflect well on them, fearing that donations will go down if the public finds out the size of the organization’s investments.
In acknowledging the settlement, a church spokesperson said it relied on legal counsel to report the holdings while still attempting to maintain its anonymity.
More to come?
According to Reuters, this action could lead to additional investigations into other religious and charitable organizations, including non-profits and universities.
