Earlier this year Ray Lucia Sr. was charged by the Securities and Exchange Commission for spreading misleading information about his “Buckets of Money” strategy at a series of investment seminars.
The SEC’s Division of Enforcement alleges that Lucia claimed that the wealth management strategy he promoted at the seminars had been empirically “backtested” over actual bear market periods.
Upon information and belief, the Buckets of Money strategy also sometimes included investing clients in various non-traded real estate investment trusts (“REITs”). REITs generally pool money from many investors, put the money in real estate, and distribute 90 percent of taxable income to shareholders.
The problem with these investments is that the front-end fees are high (often between 10 to 15 percent) and the distributions can come from borrowed funds and include some of the investor’s own money. Another problem is that the investments are illiquid and cannot easily be sold if the investor needs access to their own money.
Despite these problems, Ray Lucia continues to stand behind his Buckets of Money strategy and his recommendations that investors invest in non-traded REITs. In an article in the San Diego Reader in October 2011, he said that he always trained his salespeople to tell customers that the non-traded REITs are long-term investments. “There must be a 10- to 15-year time horizon, preferably 15. If you’re trying to redeem shares prior to the 10- to 15-year period, you are going to take a haircut. You have to go through several real estate cycles. Crap happens. And crap has now hit the real estate market.”
In the same article, Theresa Ochs, head of compliance for RJL Wealth Management (Lucia’s investment advisory firm), says that “We as a firm pay close attention to the nontraded REITs we sell. We meet regularly with the principals.” For the full article, visit http://www.sandiegoreader.com/news/2011/oct/19/citylights1/
Notwithstanding these quotes, some of the investors in the non-traded REITs sold by Lucia and his firm have suffered losses and are looking for recovery options. The White Law Group continues to assist investors in non-traded REITs by filing FINRA arbitration claims against the financial professional or brokerage firm that recommended the investments.
Financial advisors and broker-dealers have a duty to their clients to perform the necessary due diligence on an investment before offering it for sale to their clients and to ensure that any investment recommendation that is made is suitable in light of the client’s age, investment experience, net worth, and investment objectives. Due to the risks and illiquidity of non-traded REITs, these investments are arguably unsuitable for conservative, retired investors.
If you have questions about investments you made with Ray Lucia, please call the securities attorneys of The White Law Group at 312/238-9650 for a free consultation.
The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Boca Raton, Florida.
For more information on The White Law Group, visit http://www.whitesecuritieslaw.com.