Principal Transactions and Cross Trades Policy Template
Advisers Act Section 206(3) and Rule 206(3)-2
When the firm may trade with a client for its own account, act for both sides of a trade, or move an asset between clients, and the disclosure, consent and approval each needs.
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What the rule requires
Section 206(3) prohibits an adviser from buying from or selling to a client as principal, or acting as broker for someone on the other side of a client's trade, without disclosing its capacity in writing and obtaining the client's consent before the transaction completes. Rule 206(3)-2 offers an alternative route for agency cross transactions.
Cross trades between two advisory clients are not prohibited as such, but each client is owed the adviser's fiduciary duty, including a fair price and disclosure of the conflict.
What the policy covers
The sections of Luna's model Cross Trades and Principal Transactions policy. Your draft includes only the clauses that apply to your firm.
- 1Definitions
- 2Principal transactions
- 3Agency cross transactions
- 4Cross trades between clients
- 5Approval, disclosure and records
What Luna asks you
A few of the questions that shape the draft:
- Whether the firm permits principal transactions
- Whether it permits cross trades between clients
- Who approves when the CCO has an interest in the trade
- Whether the firm runs continuation vehicles or adviser-led secondaries
How drafting works
- 01Answer questions about your firm
Plain questions about how you operate. Where there is a common answer, Luna suggests it; where you are not sure, say so and it is flagged rather than assumed.
- 02Luna drafts the policy
Only the clauses that apply to your firm, in your firm's name, each traced to the rule or choice it comes from.
- 03Review what is left
Anything unanswered is marked in the text and listed for you, and the policy cannot be approved until each is settled.
- 04Edit, approve and roll out
It is your policy: edit it like any other, approve it, and have employees acknowledge it in the same place.
Read the source
Other policies
A summary of what the rule requires, current as of October 2026, so you can see what the policy covers. It is not legal advice. A policy drafted in Luna is your firm's draft to review, edit and adopt.