After eight years of litigation, which went all the way to the Supreme Court, the Securities and Exchange Commission earlier this week said it had reached a settlement with veteran financial adviser Raymond Lucia, who rose to national prominence on his radio show and in books touting an investment strategy known as "Buckets of Money."
Announced Tuesday, the settlement bars Lucia from the securities industry but allows him to immediately reapply if he chooses; it also includes a fine of $25,000, most likely a small amount compared to the legal fees that Lucia has incurred in his fight with the SEC, which dates back to 2012.
As part of the settlement, Lucia and his firm, Raymond Jay Lucia Companies Inc., neither admit nor deny the findings in the order.
Lucia had earlier been fined $300,000 by an SEC judge and barred from working as an investment adviser.
"Lucia waged a long, contentious battle, refusing to bow to an agency with unlimited resources unwilling to admit that its prosecution efforts had become wholly disproportionate to the alleged infraction," according to a statement from his attorneys.
In 2018, the Supreme Court's decision in Lucia's favor curbed SEC administrative law judges, and ruled that the 69-year-old adviser was entitled to a new hearing.
Lucia used to wow audiences with presentations showing how his investment strategy would have protected nest eggs in the booms and busts of the 1960s and ’70s, as Bloomberg news reported at the time. The SEC in its 2012 complaint said he used fake data to mislead investors.
Those presentations were at the heart of the SEC's claim.
Lucia's presentations to investors included slides that claimed to show so-called back tests of how the strategy would have performed through a series of historical market conditions, according to the SEC.
The self-described back tests were presented as empirical proof that the Buckets of Money strategy provided income for life and growth of principal under difficult market conditions, the SEC alleged.
Lucia's presentation of the back tests omitted material information about the effects of certain assumptions, and failed to disclose that they did not follow the strategy's periodic asset reallocation and that one back test had no support for the numbers presented as the results, according to the SEC.
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"The outcome is correct, but it's disappointing that FINRA had ample opportunity to investigate the merits of clients' allegations in these claims, including the testimony in the three investor arbitrations with hearings," Jeff Erez, a plaintiff's attorney representing a large portion of the Stifel clients, said.
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