Simplicity rule finds its days are numbered

I just know all you financial boffins are not going to agree with me on this one. The affable Bob Sherbin, marketing and communications director at Merrill Lynch, is one of them, and he doesn't.

The US Securities and Exchange Commission gave investment banks a deadline last Monday to simplify ratings for us poor, befuddled and frequently hood-winked investors. They were meant to get rid of jargon such as 'market out-performer' and replace them with 'buy', 'hold', and 'sell.'

On the day, Merrill came up with their own alpha-numeric version of stock categorisation. According to the legend, or code, they published - which we know other people won't have to stick to their PCs with Post-It notes because they're highly numerate - the rating for 'buy' is now represented by the number 1, 'neutral' is 2, 'sell' is 3, and 'no rating', is now 6.

Extra goodies offered by the big Wall Street investment bank include volatility risk ratings, now condensed into three categories instead of the previous four - much simpler! Low volatility risk now is now represented by the letter A, medium now B, and high C. (Clearly there were some opera buffs in the New York office.) Next on the value-added list is income ratings, or potential cash dividends. I quote: '7 - same/higher (dividend considered to be secure); 8 - same/lower (dividend not considered to be secure); and 9 - pays no cash dividend.'

This means that a company such as Cheung Kong Infrastructure goes from the old D227 rating to an A17, which apparently is nothing like the rather dramatic reduction in bra size it sounded like to me.

'We were among the very first to say were going to adopt buy sell and hold ratings and most others have subsequently followed,' he said. 'You say the system is complicated, I say the system is simple without being simplistic.