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That looks to be VERY deliberately timed to be after close of trading and giving everyone the weekend to read it…

Just updated - Friday 1st

https://supremecourt.uk/news/future-judgment

IMV the share price rise today is much more likely driven by the sale than the news stories.

The sale provides an additional degree of certainty about funds being available to cover any potential claims. Stock markets like certainty.

If the news speculation was driving the movement then Lloyd’s would be up much more. The buoyancy there is much more likely linked to NatWest’s good results reported today - profits up 4.4% and a £1.5bn buyback.

Thanks for doing that LIBERTY2.

My reading of that is that the language is being updated to reflect the language in the judgement - so that the two align when the judgement is posted.

“Have they confirmed the interim dividend or is the 2% number just pulled out of thin air?”

Couerdelion - no and sortofnot.

No, they’ve not confirmed the interim dividend.

Sortofnot in that they’ve declared the intention to raise the last dividend by 2% and return capital through share buybacks.

So there will be a riot if 2% doesn’t happen.

It’s worth adding that the proposed constraining of the role of the Financial Ombudsmen Service to ensure that they can set pseudo-regulation goes a long way to providing an environment where the Supreme Court can lean into the regulatory environment providing sufficient clarity.

It’s worth remembering that the FOS has played a not insignificant role in DCA cases by taking a different view from the FCA about how the regulations should be interpreted.

“The next big unknown to focus on is the FCA response within 6 weeks regarding the redress. They can still impose compensation regardless of the SC decision.”

I don’t agree with that second point.

The SC sets the game that’s being played and the size and shape of the pitch.

The FCA gets to set the rules within that framework.

So, if the SC determines that compliance with the regulations in force at the time of the sale is sufficient for the law, then the FCA will have a difficult time retrospectively applying regulations as it otherwise risks another court appeal.

I need to get less excited - devil, details, etc

https://www.financial-ombudsman.org.uk/news/financial-ombudsman-service-announces-change-compensation-interest-levels

An interesting snippet from today’s “Leeds Reforms”…

(Summary from Gemini)

‘ In a move that will directly impact the amount of compensation received by wronged consumers, the interest rate applied to awards will be significantly altered. The fixed rate of 8%, which has been in place for nearly a quarter of a century, will be replaced by a variable rate pegged at 1% above the Bank of England's average base rate. Given the current economic climate, this is expected to result in a lower interest component on compensation packages.

While the government has not announced a reduction in the overall compensation limits, the change to the interest rate calculation will, in many cases, lead to a lower total payout for consumers.’

This will significantly reduce payouts.

“On Hopcraft and bribery, what must be remembered is that small commissions were very explicitly allowed to be secret under CONC rules since 2014.”

Thanks for clarifying knot - I’m at the edge of my understanding on this stuff.

Let’s hope that we get a “common sense” ruling here that consumers can’t walk into a sales environment and expect the seller to be doing things for free.

It must be said that there are far more egregious breaches of trust based environment (having caught some of last night’s Panorama).

An interesting point arises from Gemini’s supposition that the SC will lean on the existence of a strong regulatory framework essentially, if borrowers can rely on the regulatory framework then so can lenders. So this would give a strong case for lenders appealing the imposition of redress prior to it being banned as they were compliant with the regulations at the time of the lending decision.

“…how many fully secret comms cases will there be for cbg”

This appears to be a key risk for CBG as the question becomes what was on the (what will be standard) paperwork used at the time and what the regulations were.

There are a couple of twists here…

Firstly, bribery currently only exists in case law within the context of there being a fiduciary duty. Not fiduciary duty, no bribery. At the moment.

And/but the tort of bribery is VERY poorly defined in case law and the SC exists to make case law. And there could be a claim under the consumer credit act or a breach of regulations.

The risk with a failure to disclose commission is that - potentially - the whole commission is repayable to the consumer. Although case law in this area effectively says that the dealer is holding this in trust for the consumer. This differs from straight DCA cases where the most likely outcome will be the need to repay the difference in commission between what was paid and the lowest available.

IMV - and as a holder here - this is not an insubstantial risk given the SC’s ruling history.

One interesting argument is why a failure to disclose commission on the finance element of the deal is any worse than failure to disclose the existence of commission and other incentives for selling the car itself. This will be a key issue for the SC.

The consumers argued that they understood that the dealer would make money on the car sale, but not the finance. But the law is here to protect consumers from egregious acts, rather from ignorance - unless the customer can prove they said “we don’t know what we’re doing here”.

Twistier than a twisty thing…

On the basis that it’s usually better to throw multiple AIs at a problem…

I’ve gotten Gemini Pro to do a deep dive research report using the parameters that it could only consider submitted evidence; what was said in the hearings and how the SC tends to rule.

The result is, I think, pretty cogent and well worth the read. Unfortunately it’s also 12 pages, so I’ve PDFd and stuck on an anonymous file sharing site at https://tinyurl.com/4u8u7p6b

The link expires in 1 week.

Just to reiterate that this is NOT an exit from car financing.

It’s an exit from the part of the business that lends you and I money so that we can pay our car and house insurance in instalments. The insurance company providing that policy doesn’t want the money turning up in dribs and drabs or the hassle of chasing delinquent payers. They also don’t want the headache of getting approval from regulators to provide financing to individuals. So they outsource that facility to companies like Close Brothers.

There’s currently a great deal of scrutiny from the regulator on how insurance companies provide value for money (or lack thereof) to customers. It means increased hassle and risk for all concerned.

Given this has NOTHING TO DO with the SC case then the timing is largely irrelevant. Except that…

If you think about it, there hasn’t been a “better” time to make an announcement like this with all the uncertainty over the business. But at some point you need to make an announcement before you tell brokers that you’re no longer serving them.

Also, if you hope for good news from the SC then you don’t release anything that could be considered “negative” news after the announcement. You get that over and done with before the good news drowns out the slight bit of negativity.

It’s not manipulation, it’s just conscious communications planning.

Does anyone know why SMT prefers to hold its bought shares in Treasury rather than than cancelling them?

20% of the issued shares are now held in Treasury.

ColinJ806 - you’re missing an understanding of how financial accounting rules distort the underlying performance of all companies, but life insurers in particular.

If you click on my name and look through my old posts then you’ll find more than one explanation of why EPS and dividend cover are pretty much worthless.

Great post stockpickfree.

But I disagree on the coin flip analogy.

As knot says, there are more than one decisions and I think that you can take a view on odds from listening to the Supreme Court proceedings.

One of the good things about the case is that it’s a real world scenario with which the judges will have interacted with. In my view, it gives a better chance of a “man of the Clapham Omnibus” type ruling.

To me, they sounded very unconvinced that a car dealer could act in their own interests in the case of selling a car and then instantly flip into having to provide a fiduciary duty to customers on finance.

That, right there, is probably worth 50% on the share price from where we are as it’ll kick off the fear element of the company being wiped out and drive a much more economically driven valuation.

Just my view.

Thanks for posting the commentary - very interesting.

The only point I wonder about is…

‘The Court’s awareness of the case’s “seismic impact” (noted by legal commentators)’

I’ll happily be corrected on this, but the job of the Supreme Court to effectively determine the practical application of legislation - taking into account case law and the intention of the legislators.

It’s not the SC’s job, though, to worry about any resulting economic consequences. That’s the job of the Government.

That’s my understanding- I’m happy to be shot down.

“Dividend has to be cut , saud it at many high dividend FTSE payers..”

What’s your reasoning for saying that?

Licker and 1.ARMANI - inflation and high borrowing costs are generally good for life insurers.

Inflation erodes the value of level annuity payments - resulting in higher overall profits for the life companies. Around 80% of annuities are level ones (https://moneyweek.com/personal-finance/pensions/is-it-worth-taking-out-an-inflation-linked-annuity-or-is-a-level-annuity-better-value).

High borrowing costs drive up gilt yields and allow life insurers to optimise how liabilities are underwritten - driving up margin.

Falling house prices are good for the equity-release businesses, which can pay less for an asset they'll sell over a period where the price falls will be a 'blip'.

There are - of course - lots of good reasons to sell. And no one should be afraid of making a profit concrete. But the above are the reasons aren't them (in my view!).

The capital markets event today was interesting - if for the pitch if nothing else.

It was unashamedly aimed at saying to analysts that are underestimating L&G’s revenue and margin growth because of L&G’s unique capital position and synergies.

It’ll be interesting to see if it yields the desired effect…