The SEC instituted cease-and-desist proceedings on September 5, 2012 against Raymond J. Lucia, Sr. and Raymond J. Lucia Companies, Inc. (“Respondents”) for alleged misleading presentations to prospective and existing investment advisory clients. Mr. Lucia has hosted a long-running daily nationally syndicated radio show, The Ray Lucia Show, and is featured on two websites. In addition, he was the featured speaker at regular seminars hosted by his company across the country, which were used to promote the radio show and website. In addition, he has written three books on retirement investing featuring his “Buckets of Money” (BOM) retirement investment strategy.
According to the allegations, in an effort to win investment advisory clients, the Respondents claimed the BOM strategy would generate inflation-adjusted income to retirees for life while protecting, and even increasing, their retirement savings. Respondents’ various public statements contain numerous references to their backtesting of the BOM strategy and to the results which Respondents claim validate the BOM strategy. Although Respondents claimed to have extensively “backtested” their claims, in actuality, they performed scant, if any, backtesting. Asked to provide the claimed documentation, they produced only two two-page spreadsheets, neither of which supported the claims made. Their claims of “numerous” backtests and a “proven” BOM strategy are not supported by the evidence.Extremely favorable numerical investment results touted by the Respondents were based upon an unrealistically low hypothetical inflation rate and a high hypothetical investment return rate for REITs, rather than real rates, which materially inflated projected returns from the purported backtesting. Furthermore, Respondents failed to make any provision for advisory fees in their spreadsheets, failed to follow the purported strategy by reallocating assets as claimed, and failed to disclose these facts to investors, further inflating projected returns in a materially misleading manner. Respondents also failed to maintain required records supporting their claims. Proceedings in the matter are anticipated in the coming months.