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📘 Level 6 Capital Concentration Rules
Policy Name: Level 6 Capital Concentration Rules
Version: v1.0
Status: ✅ LOCKED
Effective Date: December 21, 2025
Applies To: Micro Harvesting Portfolio (Level 6–classified positions)
1. Purpose
This policy governs the maximum allowable concentration of capital in Level 6 positions within the Micro Harvesting system.
Its objectives are to:
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Prevent overconfidence-driven concentration
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Preserve portfolio flexibility and reversibility
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Ensure Level 6 represents earned trust, not dominance
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Protect the system from single-regime dependency
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Maintain steady-state harvesting behavior
Level 6 capital is stabilizing capital, not leverage.
2. Definition of Level 6 Capital
Level 6 Capital is defined as:
The total deployed capital allocated to stocks classified as Level 6 — Graduated Conviction.
It reflects:
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Long-duration trust
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Reduced monitoring burden
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Higher tolerance for patience
It does not imply immunity from demotion.
3. Governing Principles (Non-Negotiable)
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Level 6 is earned through time and behavior, not performance spikes.
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Concentration limits protect the portfolio, not the stock.
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Higher trust requires stricter limits, not looser ones.
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Concentration is managed at the portfolio level, not per stock.
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Demotion is a valid and neutral corrective action.
4. Concentration Thresholds
Level 6 capital shall be governed by the following thresholds, measured as a percentage of total deployed capital:
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Soft Ceiling: 30%
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Normal operating upper band
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Triggers heightened awareness only
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Alert Threshold: 35%
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Requires explicit acknowledgment
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New Level 6 promotions are paused
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Hard Stop: 40%
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Mandatory corrective action required
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Further Level 6 exposure is prohibited
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These thresholds apply collectively, not per position.
5. Required Actions Upon Threshold Breach
5.1 Soft Ceiling (≤ 30%)
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No action required
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Continued monitoring only
5.2 Alert Threshold (> 30% and ≤ 35%)
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Suspend new Level 6 promotions
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Review Level 6 composition at quarter-end
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No forced selling is required
5.3 Hard Stop (> 35% and approaching or exceeding 40%)
The portfolio manager shall execute one or more of the following:
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Demote one or more Level 6 stocks
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Rebalance capital toward lower levels
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Increase total deployed capital elsewhere to restore ratio
Failure to act constitutes a governance violation.
6. Relationship to Promotion and Demotion
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Level 6 promotions are prohibited if they would breach the Alert Threshold
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Demotion from Level 6 is:
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Neutral
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Reversible
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Non-punitive
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No Level 6 stock is exempt from demotion due to tenure or familiarity.
7. Measurement and Reporting
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Level 6 concentration shall be:
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Calculated continuously
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Reported explicitly on the portfolio dashboard
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Measurement basis:
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Deployed capital, not allocated capital
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No discretionary adjustments are permitted.
8. Behavioral Safeguards
The portfolio manager shall not:
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Allow familiarity to override concentration limits
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Rationalize breaches due to strong conviction
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Delay corrective action to “wait for a better exit”
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Treat Level 6 status as permanent
Confidence without limits is fragility.
9. Relationship to Other Protocols
This policy operates in conjunction with:
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Level Promotion / Demotion Protocol v1.0
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Harvesting Policy v1.0
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Removal Is Neutral Principle
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SUNSET Governance & Reactivation Protocols v1.0
In case of conflict:
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Capital concentration rules supersede promotion discretion.
10. Meta-Rule
Trust deserves limits.
Limits preserve trust.
Change Log
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v1.0 — December 21, 2025
Initial codification and lock-in of the Level 6 Capital Concentration Rules.
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