20 Structure of arrangements - Agent as client Adviser firm agreements with investors (Adviser client agreement) Where arrangements are set up on the agent as client basis, the investor needs to provide their authority and specific consent to the arrangements being set up on this basis. The agreement between the adviser firm and the investor should: • Explain the basis on which the arrangements are being structured, for example that the adviser firm will be acting as agent of the client. • Explain the scope of the agency arrangement (i.e. the adviser is the client’s agent for the purpose of appointing a DIM and facilitating the provision of the DIM’s service). • Explain what ‘agent as client’ means (i.e. that the adviser will be treated as the client of the DIM, that the investor will not be a client of the DIM and the implications of this arrangement for the investor - see template wording at Appendix 3). • Obtain the requisite signed authority and consent from investors. Advisers should obtain a signed Terms of Business which confirms the investor’s explicit consent to the arrangements. Consequences of the adviser firm being classified as a professional client One of the consequences of the adviser firm being treated as the client of the DIM rather than the investor, is that some protections afforded to retail clients under the regulatory system may not apply in the same way as they do when there is a direct contractual relationship in place between the DIM and underlying investor. Furthermore, where the DIM classifies the adviser firm as a professional client, some of the rules applying to retail clients will not apply to the same degree, such as disclosure of risks and disclosure of costs and charges. These implications need to be managed by the adviser firm and explained to investors. Typically, this will be done through the client agreement. An example of how this information can be presented to investors and how the adviser firm can manage any possible loss of protections, is set out at Appendix 3. Chapter two - Structure of arrangements - Agent as client
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