- 22 years of willful reporting violations
- using 13 shell companies
- to conceal ownership of a $32 billion portfolio
I'm sure they're gutted by this ~0.016% fine.
The issue for me here is the willfulness and scale of the deception. I'm not so surprised to discover that the Church has a ~$37 billion portfolio; I'm not sufficiently interested to pay close attention to them, but but it was apparent to any but the mot casual observer that the Church was a very wealthy entity. As a religious organization, it's benefits from tax exemption; it seems to me that part of the price for that special treatment is greater transparency - notwithstanding that this isn't a tax liability case.
BTW I'm referring to 'the Church' throughout as Ensign Peak is a wholly owned entity of the Church and no management fees change hands. Further, Ensign Peak wasn't authorized to file 13Fs on its own initiative (per the order); it effectively has zero independence of its parent. I'm not sure why they set it up so that Ensign Peak pays $4m to the SEC and the Church itself $1m, but I'm going to guess because it looks better that way in press coverage and on their next form 990 filing.
What I mean about willfulness and scale is that from the outset, these shell companies were created to conceal the fact of the Church's portfolio from the public, other investors, and to a large extent their own membership. As detailed in the order, this concealment stretched over nearly 2 decades and eventually grew to encompass 13 shell companies, with new ones being set up when managers determined that business intelligence/the press were becoming aware of the arrangements. Indeed, when a public website figured out the network of reporting entities and made the facts public in 2018, 2 of the business managers of the shell companies (who were based in Salt Lake City, though the entities were registered in Delaware) resigned, expressing concern about what they had been asked to do. Rather than the network of shell companies being shut down, the troubled managers were just replaced, and the arrangement continued until the SEC got involved.
All told, this involved about 100 different acts of deception (in terms of the misleading 13f filings; I have no idea how many private or public statements might have ensued). So the settlement here works out at about $50,000 per false filing. I doubt that that did much more than cover the SEC's legal and administrative costs on the investigation and preparation for trial. The number and long timescale of the deceptions in my view demonstrates impunity; this wasn't a single negligent or reckless decision, but a long-running practice that only unravelled because third party observers connected the dots independently.
You wrote elsewhere in the thread about how we don't arrest a Ferrari driver who makes a right turn at a red light just to deter other rich assholes, while also commenting that if you serially break the traffic laws, eventually your license will get suspended. Well, they serially broke the reporting laws, and every time outside observers or some of their own staff called foul, they escalated rather than abandoned their deceptive practices.
It seems, by the way, that this might be the tip of a larger iceberg. Two former Ensign Peak managers (who may be the ones who resigned previously) have alleged that the Church has around $100 billion in assets and and has violated its nonprofit status by not distributing any of it, but instead holding it in reserve for the 'second coming of Christ'. The link below includes a recent filing with the US Senate Finance Committee.
https://religionunplugged.com/news/2023/2/8/former-employee-...
They thought they were going to get a much bigger payday by reporting the malfeasance of a 32 billion portfolio
You will lose your job and pension if you stop regularly attending church services or giving 10% of your paycheck back to the church ('tithing'). I can't imagine they don't take a harder approach to this. To be clear, it is wrong to retaliate against whistleblowers, but large organizations get away with it a lot.
1- https://www.bloomberg.com/news/features/2022-11-21/how-fidel...
https://newsroom.churchofjesuschrist.org/article/church-issu...
> 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.
Why would they ask themselves a question that they refuse to answer? Did they have to negotiate these FAQs with the SEC too?
For having Jesus Christ in its name, I have a hard time believing Jesus is running the board of this corporation and is suggesting billions be spent in investments instead of billions feeding, clothing, housing, and providing healthcare for those in need.
And don’t tell me about their humanitarian efforts. A fraction of their wealth is used on such endeavors.
End of the day, all their leadership cares about is wanting the whole world to volunteer their free time to the local congregation, pay tithing, and do temple ceremonies. Next time you meet a Mormon, ask them to clearly draw a line to what they do in the temple regularly and why that’s what Jesus wants them to do. You’ll see them hit the cognitive dissonance wall.
- Should non-profits be allowed to "invest" their tax-exempt donations?
It seems that non-profits should obtain their funding through grants or donations. Investing, on the other hand, seems like the opposite of "non-profit"
As a personal aside, I've recently been introduced to a few folks who seem to be doing extraordinarily well financially. It turns out that they all run "non-profits." And not just any non-profit, but firms that were started by their parents.
Question for everyone: I'm not nearly as aggressive about finding tax deductions as I could be. Am I just a suck here?
https://www.bloomberg.com/opinion/articles/2023-02-21/amc-ap...
But I agree, the fine should be large enough to send a clear message to other orgs like them.
https://newsroom.churchofjesuschrist.org/article/humanitaria...
I suspect most of its investments are targeted towards the same ends.
https://www.sltrib.com/news/2021/12/02/utah-makes-welfare-so...
No doubt there are some inconsistencies in how it gets handed out, and it's unfortunate that apparently some people had some experiences that included deviations from the church's policy, but for every person in that article with a bad experience you can easily find 1000 people who were blown away that the church helped them without any sort of pressure to join that church.
(fwiw, the Salt Lake Tribune has been writing stuff like this for 150 years - sometimes it adds value, but often it's disingenuous)
Fines need to be 150% of the maximum benefit of the infringement.
For those of us who either have a solitary practice or meet with a small group (coven), none of our costs for our practices are tax exempt. If we are large enough, we usually cannot be "acknowledged by the state" to get tax exempt status. When we do get enough people in our group, it's an uphill slog to even get acknowledged as 'real', although there are few and far between covens which have won what the Christians get already.
https://lawprofessors.typepad.com/nonprofit/2011/03/witches-...
https://nonprofitquarterly.org/pagans-weigh-in-on-the-laws-o...
https://www.timesunion.com/local/article/Court-considers-neo...
Basically, the Christians get away with using tax exempt status, and then populate things like "megachurches" (aka: church-based tax fraud). Those of us with less common beliefs are given the short shrift, and default treat our beliefs as "not worthy of federal and state tax exemption".
When the IRS and state tax entities start playing games of discerning which belief is real and not, is a grave concern for 1FA. The state should never be in the business of saying whose beliefs are real or not.
If you don't report your trades or positions, you can insider trade all day to your hearts desire, or in this case by the hand of God Almighty
(Thoughtful comments appreciated with downvotes; thanks.)
https://www.washingtonpost.com/investigations/mormon-church-...
However, specifically, a form 13-F is a mandatory report for (mostly) mutual funds and similar institutional investors to report in public whatever strategy they're using for investment by dumping a quarterly balance sheet (gross simplification please don't shoot the mostly accurate messenger). Only mutual funds are not permitted privacy when investing, because I donno. You and I do not have to publish our stock ownership (unless you or I are mutual funds)
There's a lot of static about the 13F because the reporting interval is too long for short term investment and too short for long term investment so as a regulatory tool it's quite useless and eliminating the entire thing wouldn't really change anything in the market for anyone. Its one of those bureaucracy tax things that we can't get rid of because it makes the middlemen money and provides a barrier to entry for smaller operators while not actually providing any useful service to anyone other than some jobs.
Hilariously I can't recall any 13F related stock scams over the past couple decades. Every ponzi or fraud in the last couple decades has been accompanied by completely useless 13F filings. My understanding is this form of busywork is very handy to publicize aggressive regulatory activity while not actually regulating anything. Great job SEC, at making sure Madoff and FTX filed their completely useless 13F forms. Thank God the SEC was busy enforcing 13F filings while ignoring what was going on at FTX.
Part of the justification for the fines being miniscule is there's not really much point to the entire process. Not filing a 13F is right up there with smoking weed WRT being a victimless crime.
I don't understand the point of the 13 shell companies because if they were actually trying to conceal information they'd have created somewhat over 330 shell companies to stay under the $100M reporting limit as I understand the entire portfolio is worth $32B. So clearly they're not "up to no good" or if they are, they're unimaginably incompetent. The press is doing the usual propaganda spin on the shell companies which is pretty funny to the people of some financial sophistication (which is probably approx none of the general public). My guess is the "shell" companies are some kind of legit strategy that failed. If you reorg to try to get outside investment using tighter categories, but your sales team is crap, resulting in minimal new investments, technically that reorg can make you a financial criminal under some weird circumstances. Thanks SEC, doin a great job keeping us safe!
"My mother was a great delegator. Each Saturday morning as my brothers and sisters and I were growing up, we received housecleaning assignments from her. Her instructions to us had been learned from her mother: “Be certain you clean thoroughly in the corners and along the mopboards. If you are going to miss anything, let it be in the center of the room.”
She knew very well if we cleaned the corners, she would never have a problem with what was left in the center of the room. That which is visible to the eye would never be left unclean.
Over the years, my mother’s counsel has had enormous application to me in many different ways. It is especially applicable to the task of spiritual housecleaning. The aspects of our lives that are on public display usually take care of themselves because we want to leave the best impression possible. But it is in the hidden corners of our lives where there are things that only we know about that we must be particularly thorough to ensure that we are clean."
---
It seems like they took the exact opposite approach. Secret, backroom dealing to hide how much money the faith had to avoid scrutiny over what they are doing with this money. It is to avoid accountability to their own members and the world at large. And it's not surprising that they do this, when they demonstrate almost no accountability to their members when it comes to transparency because members have been lulled into a "god is at the helm, don't worry about it" mentality.
The tax exempt status of religious organizations is an enormous investment that the United States created. I could see at some point that being a worthwhile investment. There are many organizations that do a lot of good. But is that the current dynamic? Is that investment of the USA getting a good return if you consider how many religious organizations hoard the wealth they accumulate, enrich their leaders, and the community they operate in gets very little in return. I helped a member of the LDS faith with some bills last year. These people have paid 10% of their income to their faith for years. I asked them why they asked me for help and not their faith. They said their local leader said they were unwilling to help them with certain bills.
So society is subsidizing the LDS faith with tax benefits in the hope that they do tremendous good, but instead we get hidden finances to avoid scrutiny, and members (not always, but often) not being able to rely on them as a safety net in tough times. There are, of course, times they can rely on them. But overall, does the tax exempt status of religions make sense? Are we getting the return on investment that we hope from this decision to not tax them?
I do not believe we are.
From the articles of faith (canonized LDS scripture):
12 We believe in being subject to kings, presidents, rulers, and magistrates, in obeying, honoring, and sustaining the law.
13 We believe in being honest, true, chaste, benevolent, virtuous, and in doing good to all men; indeed, we may say that we follow the admonition of Paul—We believe all things, we hope all things, we have endured many things, and hope to be able to endure all things. If there is anything virtuous, lovely, or of good report or praiseworthy, we seek after these things.
Everyone is playing the game of power. Some people are really good at it.
My understanding is that this is in direct violation of their tax-free status [1]. Maybe we should actually start enforcing this.
[1] https://www.irs.gov/newsroom/charities-churches-and-politics
EDIT:
I couldn't remember the name of the thing that states this, but here it is: https://en.wikipedia.org/wiki/Johnson_Amendment
why not address the actions themselves, specifically; plenty of crooks in the investment game, some of them use Church money it seems.
The SEC alleged that with the direction of the LDS leadership (i.e. "with the Church’s knowledge and approval"), Ensign Peak shell-companied the Church's funds.
Best-case scenario is that this was an attempt to hide information for the simple sake of hiding information (as nonprofits, churches are pretty heavily scrutinized relative to other institutions). Worse case, it was an attempt to hide the use of the money for political ends, which is a violation of the tax-exempt agreement of the church. And it's not a small amount of money.
This behavior is every bit as sus as any major non-profit with tens of billions of dollars under its control trying to intentionally dodge public scrutiny.
When people advocate ending religious tax-exemptions, do they mean to end tax-exemptions specific to religious groups – but not available to charities in general, or non-profits in general? Or do they also mean to deny religious groups their status as charities? Or even their status as non-profits?
2. Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof.
If you want to amend the Constitution that’s another matter.
https://www.propublica.org/article/family-research-council-i...
If you're asking how they do political activities when that's still (on paper) illegal for churches -- they have a separate organization with the same employees, board, leadership, and address called FRC Action that handles their political activity with "different" dollars.
I haven't been able to find where tax exempt status for churches is established, and I've looked, but not my area of expertise at all.
What if the goverment were to just stop giving churches tax exempt status?
(edit: clearer)
I personally think the incestuous menage-a-trois between corporate interests, the Republican party and Conservative Christianity is a bigger threat to liberty, but whatever.
Another thing to note is that religious orgs, by-in-large, run off donations through tithes and offerings. I know we're all thinking of the O'Steens, TD Jakes and the other charlatans on TBN. The types that charter private planes, and have subsidiaries.
Truthfully, they're really the minority when we consider that they fall under the same umbrella as the countless sub-100 person congregations like 1st Baptist on MLK Jr Blvd in lower San Fransisco or Iglesia de Christo on San Mateo Blvd in Albuquerque.
1) You guys do have a lot of kids. One founder of a well-known fintech startup has 10 kids! Josh James of Domo fame got over 7 if I remember...seems to be common.
2) Ensign Peak has $100 billion+ from member contributions...what do they even use it for because as far as I'm aware, the fund just keeps accumulating?
3) I'm no fan of organized religion (I grew up attending a silly megachurch). But then, I think you guys have your things in order for a large religious organization...most people I know would get corrupt and power-drunk if they were in the position of Russell Nelson and the other leaders.
4) Utah has a problem with MLM schemes, which I assume is because of strong familial ties that preys seek to exploit...anything being done about this?
I hope I'm not intrusive with my questions. Just trying to understand how you guys run despite being a diehard atheist.
https://www.fidelity.com/building-savings/charitable-giving#....
IMO neither of those is enough to warrant a blanket "sure, why not?" answer to your first question and for there not to be any restrictions at all, but off the cuff it doesn't seem terrible.
As to your 2nd question: assuming you live in the U.S., it follows the laws of diminishing returns. It might be worth it to sit down with a non-sleazy tax adviser one time (and again each time you have a major life event) to make sure you're not missing anything big and/or easy, but pursuing every possible honest deduction is exhausting and time-consuming and so you eventually reach a point where chasing that next deduction is not worth your time.
Almost definitely yes because so many uses of funds are also investments. Ex: a church buys valuable real estate to use as their main site of worship.
However maybe the returns on investment should not be tax-exempt in perpetuity!
> Investing, on the other hand, seems like the opposite of "non-profit"
There's two ways to look at this. You can consider investing in the capitalist sense where you're trying to make money and profit, and maybe the managers exploit the system, but you can consider it in a different perspective: wealth preservation and time-deferral of resources to reduce economic dependency of donations.
For example, universities often have large endowments. Universities take in small streams of money which may fluctuate with the economy and occasional massive donations, and then once a decade build a very expensive building. They probably want to protect the monies in that constant stream from inflation and economic cycles until they need to build a new building. Beyond time-deferral of resources, sometimes universities (or alum) establish a fund that should pay out continuously for eg. scholarships. By donating $1M, you can provide a 50k payout (5%) to a student, forever, and see modest growth of the fund above that (eg. ~2%) to cover inflation. This ensures that a one-time act of charity can last more than a few years.
> I've recently been introduced to a few folks who seem to be doing extraordinarily well financially. It turns out that they all run "non-profits.
Yea, maybe we need to consider the exploitation of non-profit exemptions and how it can be "self serving". But consider an alternative story: rich parents give their kids a lot of money, so they don't need to work to pay bills. This frees them to work low-pay charitable jobs because they have a separate trust fund to cover cost of living.
> If you don’t like this, there are reasonably standard solutions. The rule is actually that you have to file Form 13F if you “exercise investment discretion” over your stocks — meaning basically that you decide what stocks to buy and sell — so the trick is not to do that. If you have $1 billion to invest in the stock market, you go to a big institutional investment manager and say “hi, here’s $1 billion, please buy some stocks for me.” You agree on some investment criteria — the mandate for your investment — and you pay the manager some fees, and the manager buys the stocks for you. This saves you all sorts of aggravation — picking the stocks, doing the trading, setting up custody arrangements, etc. — but it also probably saves you from filing a Form 13F, if that’s your goal. Instead, the investment management firm files a Form 13F showing all of the stocks that it owns — that it “exercises investment discretion” over — for its various clients, including you. You are just an anonymous client; your data is aggregated with the rest of the clients.
> Presumably if you’re a big enough account, and interested enough in the markets, you might end up doing some kibbitzing about what your investment manager is buying. The manager’s mandate for your account might be narrow and customized for your interests; if you are, for instance, a fund that invests money for a religious group, you might tell the manager to avoid certain sorts of sin stocks. You might chat periodically with the manager about what they’re up to, and you might give them some input, without quite “exercising investment discretion” over the account. The manager makes the investing decisions, but with your preferences in mind.
> You could push this further. Hire an “investment manager” to buy and sell stocks for you, but just tell them exactly what to buy and sell. They’re not really in the business of making the investment decisions; they’re just in the business of sitting between you and the public Form 13F requirement. This way you get exactly the stocks you want, and presumably a fake investment manager is cheaper than a real one.
> This is illegal, though you can see how you might feel justified in doing it. “Why should random strangers get to know what stocks I own,” you might think. That seems to have been what the Mormon Church thought.
[..]
> “The Church was concerned that disclosure of the assets in the name of Ensign Peak, a known Church affiliate, would lead to negative consequences in light of the size of the Church’s portfolio,” says the complaint, and you can see their point. The effect of the 13F rules here is mostly to make public that the church has a lot of money. But the rules are the rules, and setting up 13 shell LLCs to pretend to manage your money for you doesn’t really work to get around them.
Alternatively, nobody gets ANY tax exempt status, and we should stop using tax deductions as subsidies, because they are only really available to those with ample money to play with and can afford more experienced tax professionals
For the majority religions, its still a paperwork game. However it's also rather standard filing and granting said non-profit status.
The minority religions are told time and again, that "we're not really religions and not worthy of non-profit status". And when we're able to do so, we fight for state recognition of our religion. Most of the times, this fails for us.
And naturally, there's some severe problems with "state recognition of religion leading to non-profit status" and "Congress shall make no law respecting an establishment of religion".
(a) The SEC raised a concern about how stuff was being reported in 2019, so in 2019 the church changed how stuff was being reported.
(b) It appears that all of the money was being reported to the SEC, just not in under the same entity.
So maybe not a nothingburger, but kinda on that end of the scandal spectrum.
There's a massive difference between an individual putting forth an opinion, and them using an organization to specifically promote that opinion.
If Kenneth Copeland just had a "Trump 2020" sign on his front yard, then of course that shouldn't affect their 501c3 filing, but this was during sermons, during church hours.
I also found no evidence of any church losing its non-profit status for electioneering in this manner.
This is also what the law says if they want to keep their tax-free filing: https://en.wikipedia.org/wiki/Johnson_Amendment
It would be impossible to draw the line at "politics", because of course basically everything can be considered "political". If they want to endorse a specific candidate, that's fine, but then they should pay taxes like the rest of us.
I'd rather we not go after religious organizations unless they are actually doing something criminal, sex crimes, financial crimes, etc.
It is explicitly against the rules to have the tax-free 5013c and endorse a political candidate.
If the churches explicitly endorse or oppose specific candidates, whether it's Joe Biden, Donald Trump, or Ross Perot, they are in violation of their tax-free status.
Now, you are of course free to disagree with the rules, but that's what the rules are as of right now.
Personally, I think it's a reasonable place to draw a line.
Corporations have lobbied and purchased their way into these freedoms at the cost of our wallets and futures.
Don’t play thick. I too wish these assholes got prison time for this behavior.
In all seriousness, I'm a dyed-in-the-wool capitalist and I love the SEC.
So we have, or have had, tax policies in the US that encourage home ownership, marriage, donations to charity, long-term investment, purchasing electric vehicles or electrifying your house, and more. The results of each of these is mixed, and sometimes contentious, but they're all there because congress decided at one point or another that a thing was worth encouraging or discouraging.
I can easily argue that citizenry being directly involved in directing their funds to causes that matter is more democratic than the government doing that on their behalf.
But job, yes. They want people who are devoted, if they are going to pay them to further the work. To me that makes perfect sense.
(Thoughtful comments appreciated with downvotes; thanks.)
It is pointless to even argue for the straw-man that "Christians in America need to fear persecution" since that is not the case, even the tiniest bit, in today's America.
In this case, I would agree the punishment wasn't severe enough.
SEC: Hey, the way you're filing those forms looks sneaky, don't do that.
church: k
OK, I'll bite.
The response doesn't answer the question. What "mistakes" are being referenced? Who made them?
This is a yes/no question. Don't get fooled by grammar tricks, like the ambiguous voice of made or the ambiguous reference to mistakes.
Hey, neighbor, me too!
> You'll forgive me for believing that my neighbors strongly believe otherwise.
Oh, I know exactly what you mean, but how come what they think trumps (see what I did there, haha) what I think - why does their wacky opinion count for more than mine? Or even better, doesn't the organization's official stance count for something? I mean, the church also told people to get vaccinated, but the fact that some number of them didn't doesn't lead us to conclude that the church is anti-vaccine, does it?
4) Nothing major has been done. Last year, there was a church policy update that states
> ...using friendship or a position of trust to take financial advantage of another is “a shameful betrayal of trust and confidence. Its perpetrators may be subject to criminal prosecution. Church members who commit affinity fraud may also face membership restrictions or withdrawal. … Members may not state or imply that their business dealings are sponsored by, endorsed by, or represent the Church or its leaders.”
(https://www.thechurchnews.com/2021/3/31/23216752/updates-gen...)
But that's the whole of it. No recent major sermons call out MLMs and their ilk.
2. The church was in a very bad financial position until the early 1900s because of persecution by several states and the federal government. There's a strong, strong cultural sense of preparedness and self determination to make sure that we're never in that position again. Apple in the modern era is a good comparison - better to save and have the resources on hand rather than need them and not have them.
3. Thank you, we work hard at it :)
4. There's also a strong entrepreneurial culture, both out of necessity from starting new settlements several times in the early church history, and intentionally cultivated starting after the relocation to Utah, so that the community would be more independent (see also #2).
It's a very large interconnected system.
The main effect of eliminating the tax free status for religious institutions would be a push toward charity involvement where instead of the charity work being part of the church, the church would be a part of the charity (think basement soup kitchens and the like). Instead of having "St Mary's church and Soup Kitchen" you'd have a big legal shuffle that accomplishes nothing resulting in org titles like "St Mary's Soup Kitchen and Related Worship Services"
Unless they're proposing complete elimination of all tax-exempt status for all orgs including charities and similar orgs. Which would be interesting to think about but probably impractical?
Which in a way makes them more sincere than the Democrats, whose embrace of secularism and leftism so often seems like half-measures compared to what the other party is willing to commit to.
The problem is that it doesn't do $32B worth of charitable work. Or anything close to it. And that, I think, is the problem.
Right. Religious groups in the US get tax exemptions that non-religious 501(c)(3)s don't get. Churches can exempt themselves from FICA taxes. Churches are not required to withhold income taxes on wages paid to ministers. Churches can provide a housing allowance as compensation to ministers which is exempt from taxation
https://www.irs.gov/pub/irs-pdf/p1828.pdf
https://www.irs.gov/taxtopics/tc417
> When people advocate ending religious tax-exemptions, do they mean to end tax-exemptions specific to religious groups – but not available to charities in general, or non-profits in general? Or do they also mean to deny religious groups their status as charities? Or even their status as non-profits?
I can't speak for anyone else, but I think churches should not get special treatment relative to other charitable organizations.
Churches don’t pay FICA on clergy, but the clergy are supposed to pay SECA instead. This is because the IRS doesn’t consider the church-clergy relationship to be an employer-employee. It is possible to be exempt from SECA too, but only if one asserts a religious objection to Social Security and Medicare - which I understand is rather rare. Furthermore it is only available to religious groups that existed in 1950, so if you start a new religion tomorrow you aren’t eligible, no matter how successful it might become.
Its pretty clear that OP just wants them to register as 501c3's or similar not force them to pay taxes in general
It is true that religious groups get their 501(c)(3) status automatically without having to apply for it to the IRS - but changing that rule wouldn’t lead to them paying any more tax, since if they do apply the IRS almost always just grants it anyway.
https://www.irs.gov/charities-non-profits/churches-integrate...
Because we don't live in an autocracy, and government fines can (and are) successfully challenged in court. It takes an immensely greater effort, and immensely greater resources, to enforce a $5B fine vs a $5M fine.
When a church sings at a president's inauguration, there's a signal that's being given, regardless of statements that the church might be making to the contratry. When you are celebrating, you pull your allies to celebrate with you. Politicians don't take pictures with babies because the babies are super into policy. They take pictures with babies because a picture of your baby with the politician is a social bond. When your church's musical ambassadors sing for and are on the photographic record with a politician, that's a social bond.
I actually agree with a lot of your point, but I'm uncomfortable with the extent to which you're suggesting our actions have to be governed by what others think, especially when we go on record as to saying why we are doing something. I might be hypersensitive to it now, but one of the things in our political environment that really gets under my skin is the mentality of "you say you think X, but I [somehow] know you really think Y, and Y is bad, and I'm gonna judge you the same as if you had said you think Y". So, apologies as I've probably misinterpreted what you were saying. IMO it's good to be sensitive to perception, but only to a point. If there are naysayers who will pick at whatever you do, and won't believe what you tell them anyway, letting them overly influence what you end up doing seems like a bad idea.
If there's a distinctive harm that we can draw out from the LDS Church failure to file 13Fs, I'm all ears about scaling up the penalties accordingly. But otherwise, the logic we're using applies to literally any offense Ensign Peak could have committed, no matter how marginal. I guess I'd like to start by working out whether this particular offense was marginal, or material.
"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 parent comment very clearly said “other perpetrators”.
I agree: Such a small fine is basically encouragement for other groups to commit the same violations. When the downsides are so negligible small, there is basically no risk for duplicating the bad behavior. If you get caught, pay a token fine and move on.
If it's easier to understand, just consider how much the SEC had to spend litigating this for 4 years. Now every time they come across this particular crime they'll have to spend at least that much, because the perpetrators will know there is no risk in fighting them, and nobody will preemptively stop before an investigation.
and its not even clear if 13F filings are that important, aside from "its mandated by the SEC", Ensign Peak didn't challenge this, they got a tap on the shoulders after their lawyer's solution was questioned, and they changed their tactics. Leave it up to someone else to actually challenge it.
A tiny settlement is best. Its a joke, I agree with that, but it is also rational.
As it stands it appears companies treat fines the expected way: just cost of doing business.
If OP's numbers are correct, the fine in this case amounts to 0.015% of assets under management--far lower than what anyone would pay a money manager to manage their investments. I'm sure no other potential violator would feel it necessary to change their behavior if they knew their penalty was 0.015%.
I don't understand why you are equating a single enforcement action with a single offense. We don't just suspect they did it more often, we know. And they knew that it was wrong. Settling for future compliance as sufficient just incentivizes others to lie in the future.
I'm not saying I think 5MM is the right number; I'm just saying I have no intuition for what the number should be, and the rationale I see on the thread seems to be "they're big". If I get pulled over in a Bentley with an expired sticker, I pay the same price as someone in a Kia.
Perhaps $5mm is a valid fine on top of repaying the illegal profits. But on its own? It is an endorsement.
Depends entirely on where you live. If you do the equivalent crime in Finland, you will be fined 6-14 "day fines". Each day fine is calculated to be (your_monthly_gross_income - 255€)/60, minimum of 6€ and unbound from above.
I believe that this system is much more just than flat fines. A fine is not payment for a service, it is a punishment. It should hurt as much whether you are poor or rich.
That meets an intuitive definition of fairness, but the realpolitik story there is you don't have a lot of power to make trouble for the municipality by tying them up in court for a half-decade arguing how your Bentley was actually operated legally because the definitions of "sticker" and "driving" and "expired" are very flexible (on account of them being not very flexible).
The probability a case heads towards settlement hinges on the ambiguity of the charges and the plaintiff's ability to prove said charges. Securities is way murkier than traffic operation.
Traffic fines are often considered regressive because a rich person can laugh at a few hundred dollars whereas a poor person suddenly can't afford rent.
So yeah, perhaps some fines should scale to ones means, otherwise it won't deter bad behavior.
The fine should scale with the size of the infraction. If you sticker expires on your car, the infraction is the same severity, no matter the car [0]. ~Hiding a few million vs. hiding a few billion in taxes is a whole different level.~ EDIT: They just hid it for information purposes. Not to avoid tax. Therefore, this does not apply in this case.
Also, the fine is intended to discourage the behavior. If the money obtained by breaking the law minus the fee is still positive, there's no incentive to stop breaking the law. $5MM on a fund worth a few billion is very likely to be well within the still profitable area.
[0] I'm not sure about the US, but at least in Germany, an expired sticker actually is a larger infraction for commercial vehicles, especially if you transport people. So even there it's correctly scaling with severity.
As for deterrence: it appears as if the SEC successfully deterred Ensign Peak from doing this, right? They hadn't filed properly since 1997, but the enforcement action is just a couple years old.
>Also, the fine is intended to discourage the behavior. If the money obtained by breaking the law minus the fee is still positive
The money saved not renewing your registration on time is roughly the same regardless of what you're driving so that would seem to favor the fixed fine.
In the US, sure. The people advocating for a proportional fine in the LDS case presumably would argue for a proportional one in your example, too.
https://corpgov.law.harvard.edu/2016/01/24/calculating-sec-c...
There's probably a joke in there somewhere about the 13-F process being "securities theater" as compared to the better known IT "security theater" phrase. 13-F is a classic example of "regulation can sometimes be wasteful and inconvenient" therefore anything wasteful or inconvenient can be hand waved away by appeals to "regulation" much like the classic analogy with computer security. See also security theater at airports, plenty of the governmental covid responses, etc.