The US government has recently announced hefty fines for two entities associated with the Mormon Church: AEGIS Investment Advisors LLC, and The Church of Jesus Christ of Latter-day Saints. The fines come as a result of an investigation by the Securities and Exchange Commission (SEC) into the church’s investments in private companies. The SEC charged that both entities failed to disclose potential conflicts of interest between the church and its investments. This lack of disclosure has resulted in significant financial harm to investors who were unaware of the potential conflicts. Read on to learn more about this case and what it could mean for other businesses and their investors.
US regulators fine Mormon Church and investment adviser
The Mormon Church and an investment adviser have been hit with heavy fines by US regulators.
The Securities and Exchange Commission (SEC) has fined the Church of Jesus Christ of Latter-day Saints (LDS) $7 million for failing to disclose material information about a real estate investment it made through a related entity.
Meanwhile, the Financial Industry Regulatory Authority (FINRA) has fined Merrill Lynch $5 million for allegedly misleading LDS investors about the same investment.
According to the SEC’s order, the LDS Church made a $100 million investment in a real estate development project through its Ensign Peak Advisors (EPA) entity in 2007. However, EPA failed to disclose that the project was highly leveraged and that the church would be responsible for paying back $85 million of the debt if the project failed.
The project eventually went bankrupt, and the LDS Church ended up losing nearly all of its investment.
In settling the charges, both the LDS Church and Merrill Lynch neither admitted nor denied wrongdoing.
The amount of the fines
The Mormon Church and an investment adviser have been hit with heavy fines by US regulators.
The US Securities and Exchange Commission (SEC) has fined the Church of Jesus Christ of Latter-day Saints (LDS) $5 million and an affiliated investment adviser, Ensign Peak Advisors Inc, $1 million.
The SEC said the church and its investment adviser had failed to disclose their “significant” investments in a real estate development company, City Creek Reserve Inc, which is owned by the church.
The regulator said the church and Ensign had also failed to disclose that City Creek was being used as a ” conduit” to funnel money from the LDS’s pension plan into the real estate project.
The SEC said the Mormon Church had agreed to pay the fines without admitting or denying the findings.
Why the Mormon Church and investment adviser were fined
In 2018, the U.S. Securities and Exchange Commission (SEC) announced that it had fined the Mormon Church and its investment adviser, Ensign Peak Advisors, a total of $5.5 million for violating securities laws.
The SEC’s investigation found that Ensign Peak Advisors had failed to disclose material information to church leaders about the risks associated with a $100 million investment in a hedge fund. As a result of this lack of disclosure, the church leaders were not able to make an informed decision about the investment and ultimately lost millions of dollars when the hedge fund failed.
This is not the first time that the Mormon Church has been fined for violating securities laws. In 2017, the church was fined $12 million for failing to disclose certain investments in real estate and private equity funds.
The SEC’s action against the Mormon Church and Ensign Peak Advisors should serve as a reminder to all investment advisers that they have a duty to disclose all material information to their clients, regardless of whether those clients are individuals or organizations.
How the fines will be used
The fines will be used to fund a victim compensation program, as well as pay for an independent monitor of the church’s finances.
Conclusion
This case highlights yet again the importance of regulatory measures and their power to protect consumers from any kind of unfair practices. The US regulators have taken a strong stance against those involved in the Mormon Church’s fraudulent investment scheme, sending out a clear message that such activities will not be tolerated. It serves as an important reminder for all investors to stay informed and actively watch over their investments, so they can be sure to invest in legitimate enterprises and keep safe from unfair practices.
