The U.S. Securities and Exchange Commission issued a reminder regarding prohibited conduct by underwriters in connection with initial public offering allocations.

Securities regulations prohibit underwriters and others from bidding for, purchasing, or attempting to induce any person from bidding for or purchasing an offered security during a restricted period. Generally, the restricted period begins one or five business days prior to the determination of an offering price and ends upon a person’s completion of participation in the distribution.

The SEC’s guidance serves as a reminder that attempts to induce aftermarket purchases during a restricted period are prohibited. “Attempts to induce aftermarket bids or purchases undermine the integrity of the market as an independent pricing mechanism and give prospective IPO purchasers the impression that there is a scarcity of the offered securities and the balance of their buying interest can only be satisfied in the aftermarket,” the SEC notes.

“Moreover, other investors who purchase shares in the aftermarket would not know that aftermarket demand had been stimulated by the underwriter’s unlawful conduct,” it adds.

The guidance also discusses distinctions between conduct that violates the regulations and legitimate book-building.

The commission is soliciting comments on the guidance for its consideration as it continues to monitor IPO allocation practices.