An investment adviser and talk radio host whom the Securities and Exchange Commission fined and barred from the industry for allegedly misrepresenting a retirement investment strategy may have received a boost in the form of a split decision on his appeal.
On Sept. 3, the SEC voted to uphold a decision by an in-house judge from December 2013 to punish Raymond Lucia Sr. for misleading investors about the efficacy of his “buckets of money” approach to building retirement assets. The SEC said Mr. Lucia used inflation rates to “back-test” the strategy that
did not reflect historical rates of inflation for the time periods to which he referred.
At the time, Mr. Lucia was barred and he and his firm were ordered to pay a total of $300,000 in fines.
But in
an Oct. 2 dissent to the Sept. 3 vote, the SEC's two Republican commissioners, Daniel Gallagher and Michael Piwowar, said their three other colleagues, who supported the SEC judge's ruling, had “engaged in 'rulemaking by opinion.'”
“Given the clear disclosure of the inflation rate assumptions in the slideshow presentation, we find that a reasonable investor would not have believed that actual historical rates of inflation were used in the back-tests,” wrote Mr. Piwowar and Mr. Gallagher, who stepped down from the SEC on Oct. 2.
Mr. Piwowar and Mr. Gallagher also supported Mr. Lucia in his argument that an SEC administrative law judge should not have overseen the case.
“[W]e recognize and believe it is appropriate that ... federal judges ultimately resolve this issue,” Mr. Piwowar and Mr. Gallagher wrote.
PETITION FOR REVIEW
One of Mr. Lucia's attorneys, Marc Fagel, a partner at Gibson Dunn & Crutcher, said his client has filed a petition for review of the SEC decision with the District of Columbia Circuit Court of Appeals.
The views of Mr. Piwowar and Mr. Gallagher will bolster Mr. Lucia's effort to get the decision overturned, said Todd Cipperman, principal at Cipperman Compliance Services.
“It helps [Mr. Lucia's] case,” Mr. Cipperman said. “It's not dispositive, but it's persuasive.”
The 3-2 split on the enforcement decision is
another example of the political tension within the SEC that has been cropping up frequently.
“If they're divided, the authority they wield looks weaker,” Mr. Cipperman said.
