5 ms·

It's actually a settlement, not a fine, which is probably pinned closer to the "This is the amount we think we'd have to pay lawyers to argue the case" value th

It's actually a settlement, not a fine, which is probably pinned closer to the "This is the amount we think we'd have to pay lawyers to argue the case" value than the "This is how much we would owe if we were found guilty of breaking the law" value.

tptacek 4y ago
Right, either way, I'm looking for an intuition about how much an infraction like this should cost. Presumably, the settlement also includes the LDS church's consent to start filing reliable 13F's. 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.
- tpush 4y ago
  > If I get pulled over in a Bentley with an expired sticker, I pay the same price as someone in a Kia. 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.
- nekasrbenda 4y ago
  Not in Sweden tho, traffic tickets are proportional to income.
  - tptacek 4y ago
    If you keep getting tickets in the US, you'll eventually get your license suspended.
  - teddyh 4y ago
    Many countries have it: https://en.wikipedia.org/wiki/Day-fine https://en.wikipedia.org/wiki/Day-fine
- guelo 4y ago
  For personal tax returns the typical penalty is 20% of the underpayment + interest.
- shadowgovt 4y ago
  > If I get pulled over in a Bentley with an expired sticker, I pay the same price as someone in a Kia. 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.
  - tptacek 4y ago
    Yeah, that didn't happen. The SEC brought this enforcement action in 2019.
    - mehlmao 4y ago
      Yeah, the SEC arranged a settlement so they wouldn't spend a decade in court.
- soiler 4y ago
  If the fine is less than the profit of committing the crime, then it is now de facto legal, taxed profit. There is no incentive not to continue committing the crime. Perhaps $5mm is a valid fine on top of repaying the illegal profits. But on its own? It is an endorsement.
  - xupybd 4y ago
    I don't know if they made additional profits from this. I think they hid their holdings to prevent bad press for the LDS church. Not to give them a market advantage. This appears to me to be a slap on the wrist saying "don't do that".
    - soiler 4y ago
      Fair enough, if they in fact didn't gain any money from their illegal actions then the fine is less problematic.
- Sebb767 4y ago
  > 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.~ 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.
  - tptacek 4y ago
    Right, I agree. But they didn't hide millions from taxes. They availed themselves of more privacy than the SEC allows for fund managers. If we can articulate the manner in which that inflicted more than 5MM in harm, I think we have a strong case for the fine being too low. But I have no intuition for how to work out the harm these bad filings caused. Do you? 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.
    - Sebb767 4y ago
      You're right, I was missing that they were just hiding the funds for information purposes, not tax purposes. In that case the fine is probably more appropriate.
    - deleted 4y ago
      [deleted]
    - VLM 4y ago
      Filing a 13F is essentially a tax upon all market participants, it provides zero benefit to the public. Filing has a financial cost. If the SEC settlement were less than the cost of filing over multiple years, then all rational actors would stop paying to file 13-Fs and simply pay off the SEC every couple years. The middlemen and the pretend regulators both benefit from busywork continuing, so the fee is slightly more than the cost of filing 13-Fs to encourage cooperation. 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.
- Tuna-Fish 4y ago
  > If I get pulled over in a Bentley with an expired sticker, I pay the same price as someone in a Kia. 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.
- mypalmike 4y ago
  An expired sticker is not an SEC violation. SEC violations scale based on a number of factors. https://corpgov.law.harvard.edu/2016/01/24/calculating-sec-civil-money-penalties/ https://corpgov.law.harvard.edu/2016/01/24/calculating-sec-c...
- runamok 4y ago
  Switzerland actually DOES fine you more if you have the money and break the law. https://www.hotcars.com/heres-why-a-dude-in-sweden-received-a-1-million-speeding-ticket/ https://www.hotcars.com/heres-why-a-dude-in-sweden-received-... 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.
gowld 4y ago
More accurately: "This is the amount we think we'd have to pay lawyers to scuttle the case"
sidewndr46 4y ago
Not an expert on LDS but aren't there tons of lawyers that are members?

tptacek 4y ago

Right, either way, I'm looking for an intuition about how much an infraction like this should cost. Presumably, the settlement also includes the LDS church's consent to start filing reliable 13F's. 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.

tpush 4y ago
> If I get pulled over in a Bentley with an expired sticker, I pay the same price as someone in a Kia. 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.
nekasrbenda 4y ago
Not in Sweden tho, traffic tickets are proportional to income.
- tptacek 4y ago
  If you keep getting tickets in the US, you'll eventually get your license suspended.
- teddyh 4y ago
  Many countries have it: https://en.wikipedia.org/wiki/Day-fine https://en.wikipedia.org/wiki/Day-fine
guelo 4y ago
For personal tax returns the typical penalty is 20% of the underpayment + interest.
shadowgovt 4y ago
> If I get pulled over in a Bentley with an expired sticker, I pay the same price as someone in a Kia. 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.
- tptacek 4y ago
  Yeah, that didn't happen. The SEC brought this enforcement action in 2019.
  - mehlmao 4y ago
    Yeah, the SEC arranged a settlement so they wouldn't spend a decade in court.
soiler 4y ago
If the fine is less than the profit of committing the crime, then it is now de facto legal, taxed profit. There is no incentive not to continue committing the crime. Perhaps $5mm is a valid fine on top of repaying the illegal profits. But on its own? It is an endorsement.
- xupybd 4y ago
  I don't know if they made additional profits from this. I think they hid their holdings to prevent bad press for the LDS church. Not to give them a market advantage. This appears to me to be a slap on the wrist saying "don't do that".
  - soiler 4y ago
    Fair enough, if they in fact didn't gain any money from their illegal actions then the fine is less problematic.
Sebb767 4y ago
> 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.~ 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.
- tptacek 4y ago
  Right, I agree. But they didn't hide millions from taxes. They availed themselves of more privacy than the SEC allows for fund managers. If we can articulate the manner in which that inflicted more than 5MM in harm, I think we have a strong case for the fine being too low. But I have no intuition for how to work out the harm these bad filings caused. Do you? 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.
  - Sebb767 4y ago
    You're right, I was missing that they were just hiding the funds for information purposes, not tax purposes. In that case the fine is probably more appropriate.
  - deleted 4y ago
    [deleted]
  - VLM 4y ago
    Filing a 13F is essentially a tax upon all market participants, it provides zero benefit to the public. Filing has a financial cost. If the SEC settlement were less than the cost of filing over multiple years, then all rational actors would stop paying to file 13-Fs and simply pay off the SEC every couple years. The middlemen and the pretend regulators both benefit from busywork continuing, so the fee is slightly more than the cost of filing 13-Fs to encourage cooperation. 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.
Tuna-Fish 4y ago
> If I get pulled over in a Bentley with an expired sticker, I pay the same price as someone in a Kia. 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.
mypalmike 4y ago
An expired sticker is not an SEC violation. SEC violations scale based on a number of factors. https://corpgov.law.harvard.edu/2016/01/24/calculating-sec-civil-money-penalties/ https://corpgov.law.harvard.edu/2016/01/24/calculating-sec-c...
runamok 4y ago
Switzerland actually DOES fine you more if you have the money and break the law. https://www.hotcars.com/heres-why-a-dude-in-sweden-received-a-1-million-speeding-ticket/ https://www.hotcars.com/heres-why-a-dude-in-sweden-received-... 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.

gowld 4y ago

More accurately: "This is the amount we think we'd have to pay lawyers to scuttle the case"

sidewndr46 4y ago

Not an expert on LDS but aren't there tons of lawyers that are members?