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SEC Charges Ray Lucia and Investment Firm RJL With Allegedly Misleading Investors

Raymond J. Lucia Sr., an investment advisor who hosts a nationally syndicated radio talk show, has been accused of misleading investors with claims that his “Buckets of Money” strategy helps retirees “generate inflation-adjusted income for life.” The Securities and Exchange Commission (“SEC”) accused the San Diego radio personality of misleading investors by misleadingly exaggerating the historic returns and claiming that his “Buckets of Money” strategy helps retirees “generate inflation-adjusted income for life.”

Lucia, whose radio program is broadcast daily in most of the nation’s top markets, promotes his investment program at seminars held at upscale resorts throughout the country. Some of those seminars are reportedly co-hosted by financial columnist and actor Ben Stein, who has called Lucia “the best wealth manager I know.”

The SEC proceeding (Order Instituting Administrative and Cease-and-Desist Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934, Sections 203(e), 203(f) and 203(k) of the Investment Advisers Act of 1940, and Section 9(b) of the Investment Company act of 1940 (Exchange Act Release No. 67781, Administrative Proceeding File No. 3-15006 (“Order”)) alleges that Raymond J. Lucia Companies, Inc. (“RJL”) and Lucia presented materially misleading information at a series of investment seminars RJL and Lucia hosted for potential clients.

In the Order, the SEC alleges that Lucia, a registered investment adviser representative, used the investment seminars to promote his proprietary wealth management strategy called “Buckets of Money.” Lucia allegedly claimed that his Buckets of Money strategy would allow investors to retire comfortably, and generate inflation-adjusted income for life that would exceed the returns available from other investment strategies. Lucia claimed to have empirically backtested the strategy over actual bear market periods. Lucia and RJL allegedly claimed that the superior returns of the Buckets of Money Strategy could be proven by “backtesting” the results of the strategy during past downturns in the stock market. However, the SEC charges that this purported “backtesting” was misleading because (among other reasons) it failed to utilize actual prevailing inflation rates in its calculations of the purported returns for the Buckets of Money strategy.

More specifically, the SEC charges that the purported “backtesting” was minimal and that Lucia did not maintain adequate records to show the results. Lucia and RJL allegedly admitted during the SEC’s investigation that the only testing they actually performed were some calculations that Lucia made in the late 1990s — copies of which no longer exist — and two two-page spreadsheets that failed to duplicate the advertised Buckets of Money investment strategy.

The SEC Order is only an accusation, not a finding of wrongdoing. According to the SEC, a hearing will be scheduled before an administrative law judge, at which hearing Mr. Lucia will be entitled to dispute the SEC’s charges. Mr. Lucia has not been convicted of any crime and there has not been any finding that Mr. Lucia violated laws or regulations

Lucia and RJL reportedly have recommended that many investors place a portion of their money in a “bucket” of non-traded REITs Many customers may not be aware that non-traded REITs are generally illiquid, often for periods of eight years or more. Early redemption of shares is often very limited, and any secondary market for sales of the shares is typically limited.

Investors also often may not have realized that they risked potential losses of half or more of their investments in non-traded REITs. Many non-traded REITs have lost as much as half of their value in recent years due to their use of borrowed funds to invest in real estate as well as dropping commercial real estate values in the United States.

Investors who believe they may have been sold unsuitable non-traded REITs or who believe they may have a claim against RJL Investments may contact Law Office of Christopher J. Gray, P.C. for a confidential, no obligation consultation.

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