SEC accuses financial talk show host of misleading investors

This post has been updated, as noted below.

The Securities and Exchange Commission has accused a San Diego radio talk show host and bestselling author of misleading investors about an investment strategy he calls Buckets of Money.

The SEC seeks an order that would prevent investment advisor Ray Lucia from making what it describes as false and unsupported claims that his program will help retirees “generate inflation-adjusted income for life.”

Lucia’s radio program is broadcast daily in most of the country’s top markets, including San Diego station KOGO-AM (600). He has written several books, including “Ready … Set … Retire!,” and promotes his fee-based investment program through seminars at upscale resorts throughout the country, some of them co-hosted by financial columnist and actor Ben Stein.

The SEC’s administrative order accused Lucia of falsely claiming that his investment plan – which includes a portfolio of stocks, bonds and real estate investment trusts – had been thoroughly tested and would help retirees safely generate income for decades, without jeopardizing a nest egg that could be left to their children.

Lucia and his company, Raymond J. Lucia Cos., “performed scant, if any, actual back-testing of the Buckets of Money strategy,” the SEC said in a news release.

“Lucia and RJL left their seminar attendees with a false sense of comfort about the Buckets of Money strategy,” said Michele Wein Layne, director of the SEC’s Los Angeles office. “The so-called back tests weren’t really back tests, and the strategy wasn’t proven as they claimed.”

Lucia did not immediately respond to a request for comment sent to his website.

[Updated at 3:03 p.m. Sept. 5: Lucia’s attorney Michael F. Perlis said his client did nothing wrong and expects to be vindicated. He noted that there are no allegations that investors lost money.

“I’m a big supporter of the SEC. Every once in a while the SEC goes off the tracks and it has this time. And Mr. Lucia is going to fight.”]

In addition to his radio program, books and seminars, Lucia has provided financial commentary on networks such as Fox News Channel, Fox Business, CNBC and Bloomberg TV, his website said.

His seminars are free and are used to find new clients who would be charged fees for his investment advice, the SEC said. During the seminars, Lucia shows misleading slides that indicate investors who set aside $1 million in 1973 would have generated $60,000 income each year until 1994 while their nest egg grew to more than $1.5 million, the SEC said.

The investment scenario failed to account for advisory fees and included other faulty assumptions, the SEC said. When using historically accurate inflation rates, the 1973 investor would have run out of money by 1989, the SEC said.

That is a far gloomier picture than Lucia presented in his book “Ready … Set … Retire!” in which he said his Buckets of Money system “has stood up to numerous back-tests representing some of the worst eras in past market history.”

The SEC said Lucia failed to maintain adequate records of his testing as required by federal law. “Lucia and RJL have 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.”

The SEC’s order seeks financial penalties and “other remedial action” to be determined by an administrative judge.

Meantime, Lucia’s website is promoting a Sept. 22 seminar at the Hilton San Diego Resort & Spa, with guest host Stein, a financial columnist and actor who once hosted the television show “Win Ben Stein’s Money.”

“Thousands of pre-retirees and retirees from all over the nation have attended this informative seminar and discovered how Ray’s Bucket Strategy can help them retire with confidence,” Lucia said on the website.

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