SD-10.1 — Investment Guideline Monitoring

Business Domain: BD-10 Investment Compliance & Guideline Monitoring (Middle office) · Applies: BOTH

Purpose

Checks every portfolio against the rules it must obey — before a trade, through the day, and after — confirming that what the firm holds and trades stays inside the guidelines that bind it. SD-10.1 is the compliance engine: it runs the coded rules SD-10.2 maintains against the live portfolio and raises an alert when a rule is, or would be, breached. The rules it checks come from any source — a client investment-management agreement, a fund prospectus, a limited-partnership agreement, or the institution’s own investment policy — and it runs at the cadence the portfolio’s structure dictates: pre-trade and intraday for continuously-traded portfolios, at deal approval and periodically for closed-end private-markets vehicles. It is not the maintenance of the rules — that is SD-10.2 — nor the handling of a breach once raised — that is SD-10.8 — and it does not own the mandate the rules express, which is SD-01.2’s.

Service Operations

• Run the pre-trade compliance check engine — operate the authoritative pre-trade compliance engine that evaluates a candidate order against the coded guideline set before it is released to execution, returning pass / fail / requires-override. The pre-trade engine is consumed synchronously by SD-06.1 at order entry; SD-06.1 does not carry its own pre-trade engine.
• Run intraday / continuous monitoring — re-run the checks through the day as orders fill, cash moves and prices change, catching the breaches a market move or a redemption causes rather than a trade.
• Run the post-trade / end-of-day sweep — check the full reconciled portfolio against every rule after the trading day — the catch-all that confirms compliance independent of the pre-trade gate.
• Check private-markets guideline compliance at deal approval — for closed-end vehicles, verify a proposed investment against the LPA’s eligible-investment criteria, concentration and leverage limits at the investment-committee stage, and monitor portfolio-level concentration drift as the fund draws down.
• Generate and route compliance alerts — produce the breach and warning alerts, each carrying the rule, the position and the cause, and route them to SD-10.8 for handling.
• Maintain the compliance audit trail — record every check, result and override — the evidence that the portfolio was monitored.

Inputs and outputs

• Inputs: the coded rule library from SD-10.2; proposed orders from SD-06.1; the live IBOR position and cash record from SD-12.1; valuations from BD-08; for private markets, the proposed investment from SD-04.5; market and reference data from SD-13.4.
• Outputs: compliance check results and breach / warning alerts — consumed by SD-06.1 Order Management (the pre-trade gate), SD-10.8 Compliance Breach Management & Remediation, SD-05.2 Portfolio Management & Monitoring, and the compliance reporting in BD-13.

Entities

• Consumes: E-03 Portfolio / Mandate, E-04 Holding / Position (book = ibor — guideline monitoring runs against the live IBOR position), E-16 Risk Limit (the mandate- and regulatory-derived limits, limit_type = mandate), PB-03 Order, PM-10 Fund Terms; the SD-04.5 proposed investment (private markets); the SD-06.1 proposed orders; the SD-10.2 coded rule library; the SD-12.1 live IBOR position and cash record; the SD-13.4 market and reference data; E-38 Internal Credit Rating (from SD-02.3 — the rating mandate-rating constraints read against, including minimum-rating limits and downgrade-triggered actions).
• Owns: none directly — SD-10.1 runs over the rule library SD-10.2 codes and the portfolio the book-of-record domains own; the breach it raises is owned, as a record, by SD-10.8.

Standards

• The compliance-engine conventions of the vendor capability maps — pre-trade, intraday and post-trade checking (Charles River IMS, Bloomberg AIM, BlackRock Aladdin Compliance).
• The three-lines-of-defence model — guideline monitoring is a second-line control.
• No single external standard governs the monitoring mechanism; the rules it checks are governed by the mandate and the regulation SD-10.2 and SD-10.3 carry.

Open extensions

• The Service-Operation-level input/output contracts.
• The pre-trade / intraday / post-trade and deal-approval cadence sub-model.
• The override workflow — who may override a flagged check, and on what authority.
• The boundary with SD-06.1 — the pre-trade engine is consumed synchronously by SD-06.1 at order entry; SD-06.1 does not carry its own pre-trade engine. The same boundary clause is mirrored on SD-06.1.
• The boundary with SD-10.3 — SD-10.1 runs the engine over every coded rule regardless of source; SD-10.3 consumes the engine to monitor the regulation-sourced rules and answers for the regulatory result. The running of the check is SD-10.1’s; the regulatory accountability for it is SD-10.3’s. The same boundary clause is mirrored on SD-10.3.