SEC files suit over 'Buckets of Money' seminars

Michael P. Tremoglie Sep. 6, 2012, 1:00pm

WASHINGTON (Legal Newsline) - A nationally syndicated radio "wealth" advisor has run afoul of the Securities and Exchange Commission.

The SEC has charged him with giving misleading information about his Buckets of Money strategy at a series of investment seminars that he and his company hosted for potential clients.

Investment adviser Ray Lucia, Sr. claimed that his wealth management strategy had been "empirically backtested over actual bear market periods," said the SEC. Backtesting is the process of evaluating a strategy, theory or model by applying it to historical data and calculating how it would have performed had it actually been used.

Lucia allegedly presented his strategy at the seminars indicating that that the Buckets of Money strategy was proven and would provide inflation-adjusted income to retirees while protecting and even increasing their retirement savings. But, according to the SEC, Lucia did very little proofing of his product.

"Lucia and RJL left their seminar attendees with a false sense of comfort about the Buckets of Money strategy," said Michele Wein Layne, Regional Director of the SEC's Los Angeles Office. "The so-called backtests weren't really backtests, and the strategy wasn't proven as they claimed."

The SEC says a true backtest must utilize actual data from the time period in order to get an accurate result. Lucia admitted that the only testing actually performed were some calculations that Lucia made in the late 1990s.

Lucia is also being accused of failing to maintain adequate records of the backtesting as the SEC requires. A pair of two-page spreadsheets was the only documentation of backtesting calculations - and those spreadsheets failed to duplicate the advertised investment strategy, the SEC said.

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