Regulators in Indiana are investigating Direct Source Wealth, a real estate investment firm with at least $42 million in assets that has raised money from wealthy investors for more than a half-dozen deals, but has not registered or filed notices for those deals with either state or federal regulators.
Founded in 2012 and based in Cabo Rojo, Puerto Rico, Direct Source Wealth lists seven multi-family developments as prior transactions on its website. The website also states that "the information on this website does not constitute an offer to sell securities or a solicitation of an offer to buy securities."
The home page on the company's website, however, states: "We are a commercial real estate investing community for ... sophisticated investors, accredited investors, family offices, registered investment advisers. Start investing with as little as $50,000."
Firms raising money through stock, bonds or notes are generally required to register their offerings through the Securities and Exchange Commission. Under federal law known as Regulation D, many private companies raising money operate under an exemption from such registration. But such companies typically must file what's known as a notice — dubbed a form D — with the SEC when raising money from investors.
Direct Source Wealth has not filed either a registration statement or a form D, according to a search conducted by InvestmentNews.
In some states, private companies also must file a form D notice akin to the SEC's form when raising capital. And if the company is an ongoing business, it typically has its own broker-dealer or uses an outside B-D to sell the securities. There is no mention of a related broker-dealer on the Direct Source Wealth website.
A source in the Indiana Secretary of State's office said that officials were investigating Direct Source Wealth and reaching out to the company's clients in the state. The source, who asked not to be named, also confirmed that no securities linked to the company or its various deals had been filed with the state.
Jillian Sarmo, a spokeswoman for the Colorado Department of Regulatory Agencies, also confirmed that securities of Direct Source Wealth and a number of related companies were not on file in the state. In investment presentations, Direct Source Wealth lists a Colorado property, "Lafayette Development in Denver," as a company asset.
She declined to comment when asked if the Colorado Securities Division was investigating Direct Source Wealth.
The company also has real estate assets and developments in Dayton, Ohio and Glendale, Ariz.
A securities registation statement or Reg D filing means the company and its executives are on record with regulators. If any executive has a financial history that includes a bankruptcy or another such mark, the state may want to look more closely at that individual and perhaps bring that to the attention of the SEC.
State and federal regulators in the past year have cracked down on investment companies selling unregistered, private securities. Those include the Woodbridge Group of Companies, which operated a billion-dollar, real estate Ponzi scheme, and an alleged fraud called 1 Global Capital, a company that raised $283 million from investors to make short-term business loans. Investors in those companies are waiting to see if they will be getting any of their money back.
Regulators have not charged Direct Source Wealth with any violations.
The company's founder and CEO, Kira Golden, is not currently registered as a broker or investment adviser. From 2007 to the start of 2012, she was a registered broker with Edward Jones in Sedona, Ariz., according to her BrokerCheck report.
"I founded Direct Source Wealth as a way to help investors find alternatives to the traditional Wall Street offerings — stocks, bonds, and mutual funds," Ms. Golden states on the company's website. "I set out to find a way where investors have an alignment of interest with the individuals and company introducing the investment options."
Ms. Golden could not be reached for comment for this story. Phone calls to Direct Source Wealth were routed to the voice mail of Dave Grimm, senior vice president for infrastructure. Several messages left on his voice mail were not returned.
One formerly registered adviser and due diligence consultant said he had been invited to a Direct Source Wealth client meeting in September in Moab, Utah, and had questions about the company's deals.
"I asked Kira Golden about filing the private investments, and she said she had been registered [as a broker] but wanted to focus on real estate," said Timothy Staley, who is the president of an investor protection website, InvestScam. He is not an investor with Direct Source Wealth.
The meeting, in part, promoted the firm's top investors, known in the organization as the Golden Circle, Mr. Staley said.
Ms. Golden said that the company "didn't need to register DSW in order to sell the private placements or work with someone who is registered," Mr. Staley said. "But in my mind, you can't market a security without having a notice with a state and a Reg D filing with the SEC."