Approve a Cross Trade Between VCC Mandates

Define the transaction before judging it

Start with the exact seller, buyer, instrument, quantity, currency, proposed time, settlement route and economic reason. Identify the legal VCC and relevant sub-fund or account on both sides. Do not let a shared fund manager, administrator or custody platform blur the fact that each mandate has different investors, restrictions, liquidity needs and governing documents. The transaction record should state who initiated the idea and whether an external market route was reasonably available.

Classify the arrangement before execution. It may be an internal cross, a transfer between accounts, a transaction through a broker, or a purchase by one sub-fund of an interest connected with another. Those labels can carry different document, conflict, pricing and legal consequences. If classification is uncertain, hold the order and obtain appropriate advice. The approval process should never infer permission merely because both portfolios are managed by the same team.

Related guidance: VCC sub-fund operating guide

Test benefit and mandate fit separately

Prepare two short investment records, not one blended justification. For the seller, explain why disposal fits the portfolio, how the position was valued, what alternatives were considered and whether the timing is influenced by another account. For the buyer, test suitability, concentration, liquidity, valuation, expected holding period and available alternatives. A favourable conclusion for one side cannot substitute for a defensible conclusion for the other.

Review current mandates, offering documents, side letters, internal limits and dealing procedures. Identify prohibitions, consent conditions, related-party language, valuation rules and disclosure commitments. Check whether the proposed size changes a risk limit or investor promise. If an exception would be needed, route it through the relevant exception process before the cross-trade decision. Do not use the cross to conceal a limit breach, stale price or unwanted holding.

Related guidance: cross-sub-fund investment decision

Build an independent price record

Set the pricing method before anyone knows which account benefits from a particular observation. Use evidence suited to the instrument, such as executable market indications, independent administrator or pricing-provider data, recent comparable transactions, observable inputs, or a controlled valuation method for an illiquid asset. Record time, source, spread, currency conversion, accrued amounts and adjustments. A screen capture without source identity or timing is weak evidence.

Challenge stale, one-sided or model-dependent evidence. Where a range is more reliable than a point estimate, explain how the selected price treats both sides fairly. Separate valuation uncertainty from the portfolio case. The reviewer should be able to reconstruct why the price was chosen and why neither account received a hidden transfer of value. If that cannot be shown, use an external execution route or stop the transaction.

Separate proposal, challenge and approval

List every conflict created by shared people, fees, performance outcomes, valuation influence, liquidity pressure or strategic relationships. Identify who benefits if the trade proceeds now and who bears loss if it fails. The portfolio teams can provide facts and rationale, but a person independent of both decisions should challenge price, alternatives and fairness. Escalate any unresolved personal or commercial interest through the manager’s conflict process.

The final record should state approve, approve with conditions, use an external route, defer or reject. Conditions need observable completion evidence, such as a fresh price, investor consent, revised quantity or administrator confirmation. Record the authorised approver and the documents reviewed. Approval should expire when material facts change, because a later price, liquidity event or mandate change can invalidate the original reasoning.

Related guidance: cross-sub-fund conflicts register

Control execution and failed settlement

Create linked order records for both accounts with the same instrument identity, quantity, price basis and execution reference. Lock the approved allocation before release and prevent a later change that favours the better-performing side. Tell the administrator and custodian the correct account and sub-fund identifiers. Any broker or platform involvement should be transparent in the cost and execution record.

Decide in advance how partial execution, cancellation, delay, market movement and failed settlement will be handled. Neither account should become a default loss absorber. An exception owner should assess whether the original approval remains valid, whether a fresh price is needed, and whether affected calculations or investor outputs should be held. Preserve the original order trail and record every correction rather than overwriting the event.

Related guidance: trade allocation and correction controls

Reconcile outcomes for both accounts

After settlement, compare the approved terms with the booking, cash movement, holdings, fees, accrued amounts, valuation marks and general ledger for each account. Confirm that the instrument and counterparty records identify the correct VCC and sub-fund. Check whether performance, limit, liquidity or investor reporting changed unexpectedly. One reconciled side does not close the event; the paired record should show that both mandates received the authorised outcome.

Review the event for control improvement. Repeated crosses in the same instrument, recurring liquidity transfers, consistent advantage to one account, frequent price overrides or late allocation changes can indicate a deeper conflict or operating weakness. Aggregate those patterns for compliance and board oversight. Keep the trade-level record concise, while linking to the evidence needed to reconstruct the decision, execution and closure.