Comparison of Safety Features

Direct issuance (issuer-native) structures for tokenized equity are generally considered safer than Special Purpose Vehicle (SPV) structures because they eliminate intermediary layers, providing investors with a direct legal claim on the underlying assets. By removing the "wrapper" entity, direct issuance reduces counterparty risk and ensures that shareholder rights—such as voting and dividends—are preserved and enforceable directly against the issuing company.

Comparison of Safety Features

Key Safety Advantages of Direct Issuance

1. Elimination of Intermediary Counterparty Risk

In a direct issuance model, the token is the security. The issuer maintains the master securityholder file (either on-chain or via a transfer agent), establishing a direct legal relationship with the investor. SPV structures, conversely, require a third party to hold the underlying shares. The SEC has noted that this exposes investors to "custody, operational, and intermediary insolvency risks" that a holder of the underlying security would not otherwise face [Source: https://www.sec.gov/news/statement/market-structure-subcommittee-tokenized-securities].

2. Superior Bankruptcy Remoteness

While SPVs are designed to be "bankruptcy-remote," they are not "bankruptcy-proof." Legal precedents, such as In re LTV Steel Co. and In re General Growth Properties, demonstrate that courts may allow a parent company to access assets held in an SPV or consolidate the SPV with the parent during bankruptcy proceedings [Source: https://www.bu.edu/law/journals-archive/bulr/documents/spv-bankruptcy.pdf]. Direct issuance avoids these "recharacterization" and "fraudulent transfer" risks by removing the SPV layer entirely.

3. Preservation of Governance and Economic Rights

Direct issuance ensures that all material rights—such as voting, dividends, and participation in rights offerings—attach directly to the token. SPV wrappers often fail to pass these through, instead offering "tracker" models that provide price exposure but lack voting power. Furthermore, corporate actions like spin-offs are automatically handled for direct holders, whereas SPV holders may receive less favorable cash settlements.

4. Regulatory Clarity and Retail Eligibility

Directly issued tokenized securities are generally treated as the same class as traditional shares if their rights are identical. Conversely, synthetic SPV structures may be classified as security-based swaps. Under SEC regulations, these are generally ineligible for sale to retail investors, creating significant regulatory and liquidity risks for holders of such tokens [Source: https://www.sifma.org/resources/submissions/sifma-comments-on-tokenization-of-securities/].

Structural Risks of SPVs

• Liability Contamination: SPVs can contract additional liabilities during their existence, potentially diluting the value of the tokens.
• Fragmented Structuring: Many tokenized SPVs face challenges because legal, operational, and technical decisions are made in isolation, leading to smart contracts that may not fully reflect the legal rights of the holders [Source: https://legalnodes.com/article/tokenized-spv-due-diligence]. [Note: not independently confirmed]
• Transparency Gaps: The multi-layered nature of SPVs can obscure the actual ownership trail, making it harder for investors to audit and verify their holdings.

In summary, direct issuance provides a more robust legal and operational framework by aligning the digital token directly with the underlying equity, whereas SPV structures introduce additional points of failure and legal complexity.