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.
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.
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.
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.
>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.
Perhaps $5mm is a valid fine on top of repaying the illegal profits. But on its own? It is an endorsement.
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.
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.
https://corpgov.law.harvard.edu/2016/01/24/calculating-sec-c...
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.
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.
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 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.
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.
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-...