Ann: Market Update, page-149

Nick, my guess is it has the potential to impact the CA and WTG claim - bring them both to a head sooner than might have been the case.

Reasoning: if the ASIC query relates to pro-forma at time of acquisition, the fair value of PSD noted in provisional accounts at Sept 15 and subsequent fair value changed again in the final PSD fair value in FY16 annual report then there are clear discrepancies.

1. What basis did S&G rely on to present the case and produce a pro-forma for purchasing PSD at the time of equity raising - are Watchstone disputing S&G version of where the valuations came from (hence impact warranty claim)

2. are MB alleging that S&G massaged figures presented to them from Quindell and altered documents to underpin the equity raising - making the deal look more attractive to S&G shareholders than Quindell's supplied documents would have suggested?

If the above is on the right track, then if:

a) ASIC are satisfied with the documents and explanation S&G provide

In which case that could weaken MB case, particularly the element alleging equity raising would have been unsuccessful if accurate financials were presented. It also might strengthen the reasoning for S&G continuing with guidance with what was known up until December. Upshot is MB reevaluate chance of success and withdraw the case.

Also, Watchstone left with no defence against warranty as an independent regulator is satisfied that S&G acted on good faith when agreeing a price - a price that subsequently was going to reveal lower asset value - specifically receivables.

Or

b) ASIC find S&G guilty of charges in some regard. That would strengthen MB case plus possibly give Watchstone a solid defence.

Considering the documents need to be presented early January it could bring both CA and Warranty to a head sooner then envisaged.

The stock is no way a sound investment decision today, it hasn't real been since the FY16 report (and arguably since AGM 2015). For those already in and invested time and cash in the company it is a different mindset and probably worth holding if prepared to continue with volatility and potential SP weakness or worse in short term. I'm hedged so I'm comfortable.