Regulation makes MRP discussion difficult: Leitch
Increased regulation has meant most consumers will get information about the sale of Mighty River Power shares from the media rather than their financial advisers, says the chairman of the Professional Advisers Association.
Tuesday, April 9th 2013, 6:00AM 
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by Susan Edmunds
The offer document for the shares, which are expected to start trading next month, was made public on Friday.
Shares are likely to be priced between $2.35 and $2.80 and there have been suggestions that uncertainty over Rio Tinto’s plans for Tiwai Point may push the price to the lower end of that scale.
But investors will nominate a dollar amount they wish to purchase, not a number of shares, so if there are a lot of would-be purchasers, the share price may be pushed up.
PAA chairman Peter Leitch said most potential purchasers would have to get their information from the media, because advisers were hamstrung by regulation. “Advisers can’t really comment. People have got to read the prospectus and make their own decisions.”
He said that whereas in the past, a client might ring an adviser and ask for an opinion, now regulation required that advisers go through the full advice process in order to make any comment. “I can’t tell them whether they are right to buy shares. I would need to say ‘we need to have a meeting’. It’s better just to say I don’t do that.”
Leitch said it was safer for media commentators to give their opinions than it was for financial advisers to weigh in. “It’s the first share float where a lot of people have expressed interest and they will want reassurance, they will call people like me and I kind of can’t say anything.”
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But I assume those brokers not putting out research will be happy to take the brokerage on any applications bearing their stamp.
Talking of conflicts of interest, it seems amazing that when a potential investor showed an expression of interest and they did not state a particular broker name, within 48 hours a broker had contacted them. They had no history with the broking firm, nor did they hold any direct shares or bonds in their own name. Obviously there must be an information leak somewhere.
One of the most interesting areas of the offer document is the financial information. Should advisers and potential investors really believe the projections? If the projections prove to be reasonably accurate, there is a massive increase in profitability. It almost looks like the government would not lose any cash-flow as the increase in dividends looks set to make up for the sale of 49%. People need to remember that the projection is only one potential outcome, based on a myriad of assumptions.
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What is it that you are saying Morningstar recommendations have out performed? The market that we all participate in? Your own model portfolios? Can you back this up with some facts for us please?
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