NASD proposes rules to end IPO abuses

The rules would force banks that manage such sales to disclose how many people applied to buy the shares and how they were ultimately divided up. They would also prohibit brokers from accepting "market orders" to buy IPO shares at prevailing market prices for one trading day after the sale.

The NASD, previously known as the National Association of Securities Dealers, is targeting IPO practices after allegations from investors that new stock offerings were rigged and that investment banks allocated shares of sought-after stocks to company executives to lure other business.

Other new rules would extend "lock-up" periods, when officers and directors aren't able to sell shares, to include shares received by customers or associates of the issuing company in "friends and family" programs. They would also impose new notification requirements when lock-up periods are waived. Underwriters also can't use reneged trades to benefit favored clients, the proposed rules say.