Frequently Asked Questions for Issuers
Can a single investor have multiple wallets linked to their Vertalo account?
Yes, individuals can have multiple wallets, but they must register and prove control of each wallet they wish to hold security tokens in.
What is a “Controller” function and why is it important?
The Controller function is a blockchain-based protocol that gives issuers control over their assets. There are several instances in securities law that must be satisfied in order for the SEC to accept a new technology. These mostly have to do with the ability to act on behalf of an investor. Clawbacks on illicit trades, escheatment and spousal reassignment of securities in cases of death, etc. are all matters that the SEC requires private issuers to be able to perform. Previously these activities were all handled on paper, but with blockchain technology they can now be handled digitally on the blockchain in compliance with existing securities law.
Why not simply use a spreadsheet for my cap table?
Spreadsheets may be tampered with, corrupted or have human transcription errors. Corporate ownership records are far too important to face such risks. Vertalo strives to offer encrypted, immutable and redundant storage of ownership records and to make these records available to you at all times.
What blockchain protocols does Vertalo support?
Vertalo is integrated with Tezos and Ethereum. Tezos is Vertalo’s preferred blockchain partner.
Why is Tezos Vertalo’s preferred chain of choice?
Tezos has emerged as a very capable blockchain with regards to digital securities and compliance with existing securities laws. The FA1.2 protocol for smart contracts on Tezos allows for the handling of digital securities in a way that satisfies SEC requirements. Further, Tezos has a growing community of developers and an increasing number of partners focused exclusively on digital securities, private assets, management capabilities, and support. The decentralized nature of TQ Tezos means they are focused on growing the ecosystem and acceptance of blockchain. They are also very active in financially supporting developers, teams, and companies willing to develop and create products and solutions on Tezos over other dApp blockchains.
Why does Vertalo still support Ethereum?
Ethereum, as the first dApp blockchain, has tremendous support and infrastructure worldwide. Many of the ecosystem players, including custodians, broker-dealers, and ATS’s, currently support Ethereum-based tokens only. The wallet technology and proliferation of protocols such as ERC-777 and ERC-1404 has led to adoption in different jurisdictions and use-cases in finance. Vertalo will continue to provide support for Ethereum-based tokens.
What kinds of wallets does Vertalo support?
While Vertalo supplies each investor with their own keyless wallet Vertalo supports investors using the wallet of their choice. For example, Vertalo investors currently use MetaMask, Trust Wallet, MyEtherWallet, Coinbase and different wallet hardware options.
Will Vertalo integrate with a blockchain other than Tezos or Ethereum?
Yes. For an integration fee, Vertalo can utilize any blockchain you prefer.
How does Vertalo work with wallets?
For investors unfamiliar with wallets and private key encryption, Vertalo creates secure and encrypted keyless wallets on behalf of each investor where their tokenized assets can live. This produces a simple and familiar user experience where investors can login to their accounts using an email address and password rather than registering and managing private keys. The Vertalo wallet creates a more user-friendly experience for those investors who may be reluctant or feel intimidated by the need to create their own digital wallet.
How do you handle supporting the transferability of token in the event of death, divorce, or some other forcible trade?
Regardless of token protocol, the rules associated with token transferability will be written outside of the token itself. Because Vertalo is compatible with all token protocols, and user eligibility data is managed at the individual level by the user himself, support for any applicable transferability case exists.
Can investors register their own wallets?
Yes. Investors must prove ownership of that wallet, for KYC/AML purposes. The verification process involves sending unscheduled amounts, also known as micro deposits, to a given wallet. Investors then verify those amounts, proving they have ownership over the wallet, after which their tokenized security can be transferred to the registered wallet.
When an investor registers their address(s) with Vertalo, do they have to pay gas costs? What if they haven’t funded their address?
No, investors do not pay for gas (Ethereum system usage) costs. As part of the Vertalo Registry service, gas costs are covered for the individual investor. This makes registration even easier for investors who may be new to digital assets or have always used a custodial wallet instead of their own personal one.
Does Vertalo track wallet history? How does Vertalo make sure no illicit actions took place before the wallet holds a security?
When investors use wallets other than the Vertalo wallet, the cleanliness of the third-party wallet and background of the individual will show up on the background check during KYC/AML accreditation. The ownership of the KYC/AML accreditation is held by the individual, which limits their ability to regularly spin up new wallets that are clean.
How does Vertalo integrate with partners?
Vertalo is an API-based data management solution. As such, Vertalo makes it easy to integrate with partners from any discipline. Reach out to email@example.com to schedule a demo and learn more about how integrations are handled.
How does Vertalo support compliant secondary trading?
The Vertalo V-Token is compatible with all major token protocols, and all tokens adhere to an issuing protocol. All of these protocols rely on the ability to call an external set of rules to determine whether or not the holders are eligible to trade a given token. Rather than use a whitelist, Vertalo makes a subset of data available on-chain to satisfy the test of eligibility. Putting KYC/AML vendor data on chain is critical to enabling exchanges to maintain the lowest level of friction in trading.
What is badging?
Vertalo is revolutionizing compliance checks with its badging system. Vertalo enables Broker-Dealers to release their own token, which acts as verification that a wallet has been deemed compliant. Thus, Vertalo empowers issuers to decide which Broker-Dealer’s 721 tokens will be accepted for their offering, and efficiently and automatically provide access to exclusively compliant investors.
What browsers does Vertalo support?
Vertalo prefers Google Chrome. Our UI/UX has been extensively tested using Chrome. All browsers are supported, and we are continuing to optimize all users’ experience across the most commonly used web browsers.
Does Vertalo write personal data to the blockchain?
No. Vertalo does not expose any sort of PII (personally identifiable information) when recording data on the blockchain. Instead, Vertalo writes “flags” to identify user wallets and ties them to their real-world ID. The flags are provided by KYC/AML providers. When on-chain, all identifiable information is hashed and completely private.
Does the Investor pay for Vertalo’s service?
No. Typically, the Issuer, or Broker-Dealer on the Investor’s behalf, contracts directly with and pays for Vertalo.
How much does Vertalo cost?
This depends on the complexity of your needs as well as your timeline. Agreements are split into two pieces: the one-time implementation fee and the subscription fee. The implementation fee covers the client onboarding process, including getting data onto the system, data integrity certification, investor messaging, investor portal and training. The subscription fee covers the ongoing costs to maintain your company's data on the Vertalo system.
What is the Vertalo V-Token?
The V-Token is a simple restricted token that satisfies the lock-up requirements of securities exemptions like Reg D. It is tradable only back to the original Issuer and acts simply as a placeholder token in an investor’s wallet, while the Issuer can upgrade the smart contracts and governing provisions at any time without resetting seasoning periods. Under the Transfer Controller Function, the V-Token is fully compliant with all securities regulations. Click to read more about the V-Token and its use-cases.
Who owns/controls the client records?
Vertalo hosts and has access to all client data, but the issuer owns and controls their own information at all times. Should issuers decide to sever ties with Vertalo, their data will be returned to the issuer immediately.
How is Vertalo better than other market participants?
Vertalo creates a digital user experience (UX) encompassing encrypted immutable ownership records and cap tables located on two separate blockchains and that provide fast, easy and no additional cost tokenization using the Vertalo V-Token. Issuers can tokenize and mint an offering a few minutes. The key benefit is that the Vertalo V-Token enables newly funded companies to focus their financial resources on mission-critical initiatives without having to waste precious resources on the expensive programming (that can run up to six figures) needed to create a token for assets that may face a 12 month lock up before they become liquid. Thus, Issuers can easily tokenize their Founder’s equity and capital raise classes in a fast, streamlined and inexpensive process.
Vertalo also creates a simple and streamlined user experience for clients, as Vertalo generates a keyless wallet for each of your clients. Your clients will not need to establish a digital wallet (a process clients may find intimating) nor have to store a private key. Rather, your clients access their Vertalo digital wallet 24/7 in a familiar manner using the web, their email address and a password.
Vertalo establishes new standards for convenience, speed, cost savings and an enhanced user experience for Issuers and your clients.
Why do I need Vertalo?
The time has come to move past spreadsheets for ownership records and cap tables. The embarrassment, liability and expense created by simple and sometimes unavoidable spreadsheet mistakes is simply not worth the risk to Issuers and their owners. In addition, the rapidly approaching tokenization of assets may overwhelm the most proficient spreadsheet users. The time has come to adopt Vertalo’s new and cost-effective digital tools for protecting the ownership rights of owners, employees and investors and enhancing the investor user experience (UX).
Can I trade using Vertalo?
Soon. Vertalo is in the process of integrating with tZERO, an Alternative Trading System (ATS). Issuer clients will be able to open an order page on tZERO trade page with the touch of a button in their Vertalo Issuer portal page.
Can I tokenize my assets using Vertalo? Do I have to tokenize my assets and offerings when I use Vertalo?
Yes. Issuers can easily tokenize their assets and offerings with Vertalo’s fast, easy and no additional cost V-Token. For many offerings, this process can be completed in a matter of minutes. We can also assist with creating tokens with more sophisticated functionality.
No. Vertalo does not require Issuers to tokenize your assets and offerings. Vertalo’s tokenization process is always available for use at your discretion. While we are happy to support your tokenization efforts, the decision to tokenize or not always resides with you as a Vertalo client.
Does Vertalo have an investor portal?
Yes. Vertalo offers a web-based client portal that enables a client to see all of their holdings at an Issuer. This portal represents the Vertalo digital wallet that Vertalo creates for each client. Clients access the Vertalo portal using their email address and a password. There is no need for an investor to establish a digital wallet or remember an obscure private key.
Also, Vertalo offers white-labeling of this portal to reflect an Issuer, Broker-Dealer or RIA’s branding.
Why not simply use a spreadsheet for my cap table?
Cap tables maintained on spreadsheets may become an expensive liability when controversy occurs with respect to ownership rights. Transaction histories are not maintained, the spreadsheets can become corrupted and human error can easily occur. At this point, controversies can erupt into something ugly. Worse still, correcting an adjustment to a cap table may result in embarrassing disclosures to all the investors who are impacted to any such adjustment. Ill will and expensive litigation may follow. Clearly, the time has come to move past these limited tools and enter the digital age. Vertalo provides cutting-edge tools to address these needs while enhancing the user experience (UX) for Issuers and your clients.
What is a “self-sovereign wallet”?
A self-sovereign wallet is a digital wallet that is established and controlled by the investor. Examples include Metamask, Trust Wallet and MyEtherWallet. These digital wallets must be established by the client and require the maintenance and storage of a private key. A requirement to establish a self-sovereign wallet may intimidate investors and act as an impediment to your capital raise. Also, some companies require a separate self-sovereign wallet for each holding. This requirement can become overwhelming to investors. Vertalo provides a keyless digital wallet to hold an Issuer’s assets and offerings that does not use a private key. Vertalo’s wallet is free to Issuer clients and is accessed by clients over the web using their email addresses and a password.
Do I need to pay Vertalo additional programming costs to tokenize a security?
For the Vertalo V-Token, the answer is No. The V-Token enables an Issuer to quickly and easily tokenize an offering at no additional cost. However, Issuers may want tokens with more sophisticated features than the V-Token offers and these tokens will incur additional programming costs. Vertalo is happy to develop such programming on behalf of the client or use the tokens developed by independent issuance companies.
How does Vertalo help me if I want to tokenize my private placement, but do not want to pay the additional programming costs to tokenize a security?
Vertalo’s V-Token enables an Issuer to quickly and easily tokenize assets and offering without incurring any charges for this service. The V-Token is particularly helpful when Issuers are issuing securities that face lockup periods (such as Reg D’s 12 month lockup). If desired, Issuers can utilize Vertical or another issuance company to develop a trabale token as the lockup period expires.
Does working with Vertalo prevent me from working with a token issuance provider?
No. Issuers who are Vertalo clients are free to with any issuance company of their choice.
I have an offering that uses both Reg S and Reg D. Does this offering require one or two tokens?
Based on the special challenges created by potentially conflicting regulations, accreditation requirements and lockup periods between the U.S. and other countries, Vertalo recommends that Issuers employ two tokens - One token for the Reg S offering and another token for their Reg D offering. Both of these tokens can be implemented through separate V-Token instances.