For Internal Cross Trades to be valid, what must the advisers ensure regarding compensation?

For internal cross trades to be deemed valid, advisers must ensure that no compensation is received outside of the advisory fees. This requirement is in place to maintain transparency and to align the interests of the advisory firms with those of their clients. The prohibition on additional compensation helps prevent conflicts of interest that could arise if advisers were financially incentivized to favor one client over another in these transactions.

By restricting compensation solely to advisory fees, the firm reinforces its fiduciary duty, ensuring that it acts in the best interest of all clients involved in a cross trade. This approach also mitigates the risk of undue influence or manipulation in the pricing and execution of trades between clients. Therefore, ensuring that only advisory fees are applicable ensures the integrity of the internal cross trading process.