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📘 Quarterly Reset & Capital Containment Rule
Policy Name: Quarterly Reset & Capital Containment Rule
Version: v1.0
Status: ✅ LOCKED
Effective Date: December 21, 2025
Applies To: Micro Harvesting Portfolio (portfolio-level governance)
1. Purpose
This rule establishes a quarterly governance checkpoint to ensure that non-operational capital—particularly SUNSET-related balances—remains immaterial, contained, and ignorable.
Its objectives are to:
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Prevent silent accumulation of inactive capital
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Preserve clarity between active and inactive funds
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Enforce deliberate, non-reactive capital decisions
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Avoid running parallel “shadow portfolios”
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Maintain operational focus on active harvesting
The Quarterly Reset is a control mechanism, not a performance review.
2. Definition of SUNSET Total Capital
SUNSET Total Capital is defined as:
The aggregate of all residual balances associated with SUNSET-classified stocks.
This may include:
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Residual cash after liquidation
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Small realized gains or losses (accounting artifacts)
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Closed-position remnants with no active mandate
It explicitly excludes:
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Active positions
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Deployed rotational capital
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Anchor or RTS shares
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Any capital eligible for harvesting
3. The 5% Containment Threshold
At each quarter-end (March 31, June 30, September 30, December 31):
SUNSET Total Capital must be ≤ 5% of total portfolio capital.
This threshold functions as a containment limit, not a target.
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≤ 5% → SUNSET remains immaterial and operationally silent
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> 5% → SUNSET becomes governance-relevant and requires action
4. Quarterly Reset Procedure
At quarter-end, the portfolio manager shall:
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Calculate total portfolio capital
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Compute SUNSET Total Capital
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Confirm compliance with the 5% threshold
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Record the outcome as PASS or BREACH
No intra-quarter monitoring is required.
5. Actions Required Upon Threshold Breach
If SUNSET Total Capital exceeds 5%, the portfolio manager shall, within the following quarter, execute one or more of the actions below:
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Formal Reclassification
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Convert SUNSET balances to cash reserve, buffer fund, or DRH (if applicable)
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Intentional Redeployment
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Reallocate capital to eligible active positions
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Only after passing standard eligibility checks
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Explicit Freezing
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Label excess as “Legacy Residual Capital – Non-Deployable”
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Remove it from all allocation and deployment math
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No ad-hoc, emotional, or compensatory trades are permitted.
6. What the Quarterly Reset Is Not
The Quarterly Reset is not:
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❌ A forced liquidation event
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❌ A mandate to realize losses
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❌ A requirement to “clean up” for cosmetic reasons
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❌ A trigger for new trades
It exists solely to maintain capital hygiene.
7. Reporting and Dashboard Treatment
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SUNSET metrics are reported only at the portfolio level
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No per-stock SUNSET reporting is allowed
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Reset outcomes may be noted as PASS/BREACH without commentary
Visibility exists for governance, not execution.
8. Relationship to Other Protocols
This rule operates in conjunction with:
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SUNSET Governance Protocol v1.0
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Removal Is Neutral Principle
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Level Promotion / Demotion Protocol v1.0
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Harvesting Policy v1.0
In case of conflict:
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Capital containment supersedes discretionary redeployment.
9. Behavioral Safeguards
The portfolio manager shall not:
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Ignore a breach due to small absolute peso values
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Delay action to avoid documentation
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Reframe containment as a performance issue
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Use the reset to justify impulsive trades
Governance silence after PASS is compliance.
10. Meta-Rule
Inactive capital must remain small, quiet, and forgettable.
Change Log
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v1.0 — December 21, 2025
Initial codification and lock-in of the Quarterly Reset & Capital Containment Rule.
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