Methodology note
Composite rule logic: AND, OR, NOT
A composite rule combines the outcomes of other approved rules with AND, OR and NOT. It lets a policy say "derivatives only in permitted classes and only with a hedging attestation". It combines outcomes, not numbers, so an operand that was not evaluated makes the composite not evaluated rather than letting an unknown pass.
composite · Manual obligations and attestationsmanual_obligationHow the operators work
- AND holds when every operand holds; one breaching operand fails it.
- OR holds when at least one operand holds.
- NOT inverts an operand.
Each operand is an approved rule with its own result, so the composite's evidence is its operands' evidence.
Unknowns do not launder
If an operand was not evaluated, the composite is not evaluated (OPERAND_NOT_EVALUATED). The registry's worked case makes the point with OR: a compliant operand and an unevaluated one do not make a pass.
If no operand applies to the portfolio, the composite reads not applicable (NO_APPLICABLE_OPERANDS).
Where composites help
A manual obligation can be an operand. "Derivatives only for hedging" becomes a permitted-class rule AND an attestation that the derivatives held were hedges; see the clause.
Conditional limits can be built the same way, by combining the rule for each case. Name each operand clearly, because the composite's result lists the failing ones.
What composites cannot express
A composite combines pass or fail outcomes; it cannot add numbers across rules. A test that depends on a sum of qualifying positions is not one composite.
The UCITS rule that holdings above 5% of assets may not together exceed 40% is such a test. It is not built into the registry today. A policy that relies on it needs a separate control, such as a manual obligation.
Questions
Does a composite rule need its own approval?
Yes. It is a rule version like any other, approved under maker-checker, and its operands keep their own approvals.
What does a failed composite report?
The failing operands. In the registry's worked case, an AND over a cash band and an issuer cap names the issuer cap as the failing operand.
Sources
- Directive 2009/65/EC, consolidated version of 16 April 2026 (EUR-Lex, source of record), Arts 52-57 · CC BY 4.0 · Read on12 October 2026