Principal Trading and Agency Cross Transactions for Advisory Clients: Are Your Policies and Procedures Compliant?

August 2015

 

Principal and Agency Cross Transactions Require Disclosure and Client Consent:

Does your firm perform Principal and/or Agency Cross Transactions? If so, are you meeting the applicable rule requirements? Do your Policies and Procedures adequately reflect these requirements?

A Principal Trade is one where the RIA (or an affiliate) trades from its own account and sells to, or buys, from the client from its own inventory. Principal Trades are commonly done on fixed income securities. An Agency Cross Trade is a transaction between two accounts managed by the same adviser. Principal and Agency cross transactions are governed by Rule 206(3)-2 of the Investment Advisers Act of 1940.

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