SEC Charges Ray Lucia for Misleading Retired Investors

Radio personality and investment advisor Ray Lucia has been charged by the Securities and Exchange Commission for misleading retired investors through educational campaigns. While the charges are unrelated to his representation of Greenlight Financial’s reverse mortgage business, Greenlight has suspended the use of all marketing and advertising featuring Lucia until the allegations are resolved.

The SEC charges Lucia, a nationally syndicated radio personality and financial advice author, and his company formerly named Raymond J. Lucia Companies Inc. Tuesday for spreading misleading information about his “Buckets of Money” strategy at a series of investment seminars that he and his company hosted for potential clients, according to the SEC order.

The agency’s enforcement division alleges that Lucia claimed the strategy had been empirically “backtested” over bear market periods during seminars before retirees.

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“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 Regional Office. “The so-called backtests weren’t really backtests, and the strategy wasn’t proven as they claimed.”

An attorney representing Lucia said his client expects to be vindicated and noted that there were no allegations that investors had lost money, the LA Times reported. Lucia made a statement in defense via his website this week, explaining the assumptions used in his presentation are widely accepted by large organizations including AARP. Additionally, he states the slides in question from his presentation were removed in 2010 upon the SEC’s initial audit of the presentation.

“The SEC does not allege that any potential investor was defrauded or that any investor complained, was harmed or incurred any portfolio loss,” he states.

Lucia has represented Irvine, Calif.-based Greenlight Reverse as a spokesman since August 2011, as a financial planner with a specialty in reverse mortgages.

Greenlight says the company is aware of the allegations and stresses that the charges are unrelated to Lucia’s role as a reverse mortgage spokesman.

“None of the charges made by the SEC are related to Ray Lucia’s endorsement role for Greenlight Financial Services, Inc. reverse mortgage products,” Justin Helwig, Greenlight vice president said in a statement emailed to RMD. “Greenlight requires all of its marketing partners to uphold the highest standards of ethics. Until these charges are resolved, Greenlight will suspend its reverse mortgage advertising featuring Ray Lucia and will re-examine it at an appropriate time. Furthermore, Greenlight’s reverse mortgage products are not affiliated or associated with any investment products or services offered by Mr. Lucia or any of his companies.”

Written by Elizabeth Ecker

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  • For some time our industry has emphasized education as a methodology and has had little emphasis on the content of that “education.”  Can educational campaigns be misleading?  The SEC thinks so.

    Spending time for months on the reverse mortgage Linked In groups and engaging originators in the false claims they make has been amazing.  Oh, the things I have learned.

    Yesterday one originator declared that all HECMs for Purchase had to be fixed rate.  That same originator along with several others have declared that the only way to obtain a full payout at funding is with a fixed rate product.  Others have confused deed-in-lieu-of-foreclosure with one of the values of FHA insurance.  At least one long-time originator got her feelings hurt when it was pointed out that there is no additional value of a reverse mortgage being nonrecourse in a state which is generally recognized as a nonrecourse state when it comes to principal residences.

    One originator who has been in the industry for far more years than I stated that with FHA insurance no foreclosure can take place unless there is a default for nonpayment of taxes and insurance.  Another long-time originator declared that rentals operations could never exist on properties collaterizing HECMs until I pointed out that there are no such rules particularly when it comes to 2-4 unit properties.  Some declare that everyone should get a HECM who can qualify for them.  Yet others make having a HECM the cure for bad investment practices and poor financial planning.  On and on it goes with no foundation in facts.

    Then there is my very favorite, FHA insurance makes HECMs nonrecourse.  Most originators seem to present the value of FHA insurance to the borrower as protecting the borrower from the claims of the lender at termination if the balance due on the home exceeds its then value.  Most originators have no idea that lender claims are contingent upon the lenders following FHA rules and borrowers providing being truthful in their applications; yet by law and by the loan documents, a HECM is nonrecourse whether FHA honors a lender claim or not.  Why do we need this false claim to justify the costs of FHA insurance? 

    Unless we are stressing content of the education as much as the methodology, we, as industry will not be immune from charges of producing misleading educational campaigns.  

    The SEC accusation is a healthy reminder that the mechanics of education should only be emphasized in order to implement content which is factual and covers all of the points needed for a senior to make an informed decision which is grounded in facts, not myths.  The nonsense which is pawned off today as education needs to be scrapped and the industry needs to double down on its efforts to train originators to provide factual and truthful information to prospects.    

  • I have been a radio and internet follower of Ray Lucia’s for about 6 years. I can safely say that he is one of the most knowledgeable, sincere, and true advocates for consumers and retirees in our country today. I firmly believe he knows more about Reverse Mortgages that all the other ” celebrity ” spokesman combined. I believe the SEC has made the allegaions against him based on investment advice, and nothing about the Reverse Mortgage product. I think it would be a little more helpful for the SEC to focus on the major investment firms on Wall Street  when it comes to violations….looks like they have missed the boat on enforcement when it comes to some major violations by those individuals, credit default swaps come immediately to mind…..I would ask that anybody reading my comments, tune in the the Ray Lucia show for a few days and listen to his advice, and the advice of his in studio staff,they field questions and concerns on the spot, and give clear, concise, and sensible answers to all that call in, with no hidden agenda, they just want to really help people. And, you may pick up some facts to help in your own Reverse Mortgage practice.

    • Reverse62mortgage,

      I do not question the content of your evaluation of Ray.  My advice about suddenly tuning into Ray’s radio or TV shows is just the opposite.

      Let those who are adherents of Ray continue to be so but those who are not, should not suddenly be so.

      Ray has been accused before.  Let us see how he comes out of this mess before so quickly we endorse him or his advice.

  • This is great.  I don’t know anything about Ray Lucia, but the harm to the RM industry has already been done with the SEC’s allegations, regardless if he is actually guilty of anything. 

  • Ray Lucia is a man of integrity.  His response is on http://www.RayLucia.com.  He is vigorously fighting these false accusations.  Watch it for yourselves.   The viewers trust Ray and his team of advisors.  If Greenlight doesn’t rehire him, there will be a few San Diego based reverse mortgage companies interviewing him because he loves seniors more than anybody.

    • Scott,

      Oh please, “more than anybody.”  I remember what followers used to say about Jim and Tammy Faye Baker.  Not much different.

      What is interesting is that when the SEC challenged a couple of his slides he removed them seemingly without dispute.  The guy may have the best of intentions but….

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