The National Association of Securities Dealers has announced proposed new rules governing securities recommendations made by research analysts.

The rules proposed by the U.S. organization would address the potential conflicts of interest faced by research analysts, and are backed by the NASD’s capacity to enforce compliance through disciplinary action. The NASD has developed these rule changes with the support of the House Financial Services Committee and its Capital Markets Subcommittee and the Securities and Exchange Commission.

The changes would require increased disclosure of conflicts in research reports and public appearances, prohibit analysts from purchasing or receiving pre-IPO (or cheap stock), prohibit tying analyst compensation more generally to specific investment-banking transactions, and tightly restrict an analyst’s personal trading of securities. The proposal also would prohibit investment-banking departments from controlling the contents of research reports. Under the proposal, the member firm must disclose ownership in the recommended company or whether it receives compensation from it.

Firms would also have to clarify the meanings of their research ratings and provide historical price and ratings-distribution data in research reports. These measures are aimed at helping investors to evaluate and compare the quality of research.

In conjunction with the rule proposal announced today, the NASD is launching an initiative to educate investors about research reports, their value and their limitations. The NYSE is expected to propose similar rules.

“This is a tough and comprehensive set of rules,” said Robert Glauber, chairman and CEO of the NASD. “It is a combination of disclosure and outright prohibitions that I believe will protect investors and go a long way to dealing with conflicts of interest. These rules will be vigorously enforced with the full range of disciplinary options available to the NASD.”