MESSRS RAMP, Stuffit and Runne in New York are making big noises about new codes of practice to bring compensation for investment analysts down to earth. They trooped off to Washington the other day to tell Congress that all the big investment banks agree something must be done to distance analysts from the corporate finance activities of their firms. From now on, say the new guidelines, analysts should no longer report to investment banking departments, their pay should be linked to their forecasting abilities rather than a percentage of the money they bring in on big deals and trading desks should not be allowed to direct pay to chosen analysts. Uh-huh. Notice the emphasis on 'should'. Go a little deeper and you find that the big boys who signed up for these guidelines each agreed to do no more than 'change' only one of the several practices criticised in the guidelines. I could not find the words 'will comply with the guidelines'. But they certainly have interests at stake here. Why should analysts get all the loot? What about shareholders? It is like football team owners complaining about the big figure contracts they sign to get players. They do not complain about the ticket prices they charge. They just want to keep more of the proceeds themselves. As long as these investment banks continue to rake in for themselves up to 7 per cent of the amounts for which they sell their big deals to the public nothing really changes for their clients. So the analysts get less. So what? Someone just as undeserving in the firm gets more. The clients do not get the money. The cost of bringing some of these deals to the public certainly does not come to 7 per cent of their value. I have sat in on deals for which investment banks would charge 7 per cent and seen them done for less than 50 basis points. Here is how it works when a real stockbroker does it. A company executive calls up the senior man on the dealing desk to say he wants to make a big placement of stock. They already know each other on a professional basis and they soon agree a price, let's say a 3 per cent discount from the day's closing price, and a date, say a day hence. The dealing desk senior does not bother with first testing the market or consulting analysts. He sits on the desk every day and, unlike corporate financiers who themselves actually know few investors, fewer stocks and less still about trading them, he is a widely grounded man and knows what the market will take. It is his job. He marshals his troops and at H-Hour they all get on the phones and tell their clients they can have as much of the stock as they like at that price for the next 15 minutes and then things may get tight. Half an hour later it is all done. The New York banks do not like this way of doing things. There is no money in it for them and they are in any case so fragmented in how they do business that they have great difficulty doing it this way. But they are good, very good indeed, at pulling the wool over the eyes of their corporate clients. I don't know how the New York cartel has managed to keep its huge margins so long. It is as much a mystery to me now as when I used to work for one of those banks and regularly saw it happen. I do know, however, that the fundamental problem is not the analysts and that jumping on them will achieve very little. These new guidelines are just a smokescreen to hide a general corporate policy of gouging clients.