25 Structure of arrangements - Reliance on others The DIM is responsible for: • Explaining its investment services / proposition clearly to adviser firms to allow them to undertake their due diligence. This disclosure should include clear information on the target market that the DIM has set for its service, on its investment processes and on the funds / financial instruments it uses. • Managing the client’s portfolio in accordance with the mandate agreed. Whilst DIMs can take advantage of the ‘reliance on others’ rule, it is important to note that both the DIM and adviser firm have their own regulatory obligations to the underlying investor (including suitability). Therefore, it is essential that the interface between the adviser and DIM is as strong as possible to ensure consistency of understanding and that both parties are acting in the best interests of the client. The DIM needs to be comfortable with the quality of the KYC information being provided to it by the adviser. This is to ensure it can show that decisions it makes to trade are suitable. It is prudent, and good business practice, for any FCA authorised firm engaging with third parties to undertake appropriate due diligence on those third parties at outset and on an ongoing basis. Whilst DIMs can use the reliance on others rule, they may wish to satisfy themselves about the quality of the information that is being provided to them. There are two main ways in which this can be done. The DIM can: 1. Put in place sample checks for adviser firms’ clients as cases are submitted to ensure there is sufficient KYC information recorded to allow it to fulfil its own suitability obligations. 2. Undertake a general review of the adviser’s KYC processes to ensure they will be providing sufficient KYC information to allow the DIM to fulfil its obligations. This assessment should be carried out on a regular basis. Chapter three - Structure of arrangements - Reliance on others
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