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Mormon Church Investment Portfolio Hits $100 Billion. SEC Starts Investigation.

The Securities and Exchange Commission is investigating the Mormon Church’s past efforts to keep its giant investment portfolio a secret, a practice that ended after a former employee revealed in 2019 that the church had amassed $100 billion of holdings.

The SEC’s investigation has focused on whether the Church of Jesus Christ of Latter-day Saints, also known as LDS, complied with disclosure requirements for large money managers. It is at an advanced stage and is likely to lead to a settlement in the coming months, people familiar with the matter said.

The SEC historically has punished violations of money-manager reporting rules by levying fines. The size of the fine being sought by the SEC’s enforcement staff couldn’t be learned. The agency sometimes closes investigations, even those that have reached an advanced stage, without taking formal enforcement action.

The entity at the center of the SEC’s investigation is Ensign Peak Advisors Inc., an investment firm owned by the church that manages its assets. Ensign Peak has made disclosure filings under its own name with the SEC since February 2020.

Doug Andersen, a spokesman for the Church of Jesus Christ of Latter-day Saints, declined to confirm or deny the SEC investigation’s existence. “The church works with many government regulators to ensure we are in compliance with the law,” he said. “We take those responsibilities very seriously.” Ensign Peak executives didn’t respond to requests for comment.

The current size of Ensign Peak’s holdings remains a tightly held secret. The firm, based in Salt Lake City, was incorporated in 1997. Under SEC rules, it must disclose some types of investments, like U.S.-listed stocks, that it manages directly, which amounted to roughly $40 billion on Sept. 30. The remainder of the portfolio is made up of investments such as fixed-income securities, private companies or funds. Ensign Peak had an estimated $100 billion of holdings in 2019.

Investment managers with at least $100 million under management publicly report their stockholdings quarterly. The numbers are tracked by public companies and investors. About 5,000 entities file the form, according to SEC data made public in 2020.

The size of the church’s investment holdings first came to light in 2019, after a former Ensign Peak investment manager, David Nielsen, filed a whistleblower complaint with the Internal Revenue Service, claiming that Ensign Peak shouldn’t be treated as a tax-exempt charity because it didn’t engage in any charitable activities.

The complaint showed for the first time how big Ensign Peak had grown. At the time it was more than twice the size of the Harvard endowment and on par with some of the biggest sovereign-wealth funds in the world. “We’ve tried to be somewhat anonymous,” Roger Clarke, then head of Ensign Peak, said in an interview at the time. The firm operated out of a fourth-floor office, above a Salt Lake City food court.

Ensign Peak and church officials said they hadn’t violated any tax laws and that the fund was a rainy-day account to be used in difficult economic times. Mr. Clarke said he believed church leaders were concerned that public knowledge of the scale of the firm’s assets might discourage church members from making donations, known as tithing.

At the time, some church members asked why details about the fund had been tightly held for so long, what the money was for, and whether tithing so much to the church should still be the standard practice. Members of the church must give 10% of their income each year to remain in good standing.

More recently, attorneys for Mr. Nielsen on Jan. 31 gave a 90-page memo to the Senate Finance Committee in which they alleged that Ensign Peak had made false statements to the IRS in publicly available filings about the size of its assets and whether the firm held foreign bank accounts. Mr. Nielsen’s attorneys asked the committee to investigate.

Mr. Andersen, the church spokesman, said: “The church, along with our investment manager, Ensign Peak Advisors, have only recently been made aware of allegations brought forward by a former Ensign Peak employee. We are always willing to work with government regulators to resolve concerns and are committed to full compliance.” A spokesman for the Senate Finance Committee confirmed it received the memo, but he declined to comment further.

The bar for enforcing the reporting requirement, known as 13-F, is low; regulators don’t have to prove a company intended to violate the rule. Simply failing to file the forms, or omitting required information, is enough to breach the law.

“The SEC is concerned when people don’t file their 13-F reports because it’s information the market isn’t getting that it’s entitled to get under the law,” said Robert Plaze, a partner at Proskauer Rose LLP who previously was a senior official in the SEC division that oversees investment funds and managers.

The data that investment managers are required to disclose is released with a 45-day delay, making it less valuable to traders interested in following the moves of large funds. Even so, public companies tap the information to track their major shareholders, while activist investors use the data to identify the investors whose support they may need during a contest for control of a company.

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