8. The $5 million civil penalty was like a “speeding ticket” or a “parking ticket”

This analogy reflects the relative size of the civil penalty: a $5 million fine vs tens of billions of dollars in covered 13F securities held during the period of noncompliance.

However, the analogy creates a false equivalency: on the one hand, the rather banal common social denominator of receiving a speeding ticket or a parking ticket, and on the other hand, a calculated, decades-long institutional effort to deceive securities regulators and the investing public with layers of smokescreen designed to reduce the risk of discovery.

Moreover, the $5 million fine was not the whole penalty, unlike with aforementioned tickets, which can generally be paid and forgotten. The reputational impact of non-refutable findings laid out in the SEC Order is, arguably, a far greater penalty against the Church and is the SEC’s primary post-settlement deterrent. The Order implicates both Ensign Peak and the Church’s First Presidency in an intricate scheme to put institutional interests above compliance with the law.

The $5 million combined civil penalty ($4 million from Ensign Peak, $1 million from the LDS Church), is also 50x larger than any previous 13F-related fine (see p.17 of our analysis report). It is unclear whether assets under management impacts the size of 13F fines.

It appears the maximum civil penalty for making “false and misleading” statements on federal securities filings is $5 million for an individual and $25 million for a company. Based on language in the Order, appears that the Church, recognized in the SEC Order as a “corporation sole,” may have successfully argued that the maximum fine for an individual, or $5 million in total, should apply.

Roughly 98% of SEC cases end with settlement. SEC settlement policy aims to achieve the most efficient outcomes for government resources, namely (a) settlement amounts similar to what would reasonably be expected through litigation, and (b) determination that deterrence goals have been met. For more on SEC settlement policy see here, here and here.