NEW YORK (CNN/Money) - A panel convened at the request of federal regulators has recommended that investment banks change they way they sell and allocate IPOs in an effort to restore investor confidence during a year when only five companies have gone public.

The report by the New York Stock Exchange and NASD covers some of the areas covered in this year's $1.4 billion settlement aimed at cleaning up bull-market abuses on Wall Street.

The panel of business heavyweights said Thursday it wants an end to the "abusive" IPO allocation practice of spinning, which is when banks give shares from initial public offerings to investment banking clients.

A level playing field must be created to restore confidence in the market for new stock offerings, according to the panel, which was convened at the request of the Securities and Exchange Commission and made 20 recommendations aimed at improving the transparency of pricing and ending the IPO favoritism that banks confer to clients.

"In recent years ... public confidence in the integrity of the IPO process has eroded significantly," the IPO Advisory Committee report said.

The group proposed that the already prohibited practice of "laddering" -- in which underwriters demand that IPO buyers purchase additional shares when the stock is traded in the open market, thereby driving the price even higher -- be prevented.

Share allotments held for "friends and family" of executives should be limited to 5 percent of total shares. In the past, those allotments sometimes crept up to 10 percent of the total shares outstanding.

Led by the former chief executive of the Altria Group, Geoffrey Bible, the group proposed changes from making IPO roadshows open to the public to reducing the number of shares set aside for "friends and family."

John Brennan, chairman of the Vanguard Group, and William Hambrecht, who founded WR Hambrecht, were also on the 16-member panel.

Earlier this month, iPayment, the fifth company to go public this year, snapped a nine-week IPO drought that was the longest without a company going public since Sept. 24, 1975, according to Thomson Financial.

Demand for IPOs has tumbled during the stock market's three-year fall. The number of new offerings fell 26 percent in 2000, tumbled 72 percent in 2001, and 12 percent last year, when 97 companies debuted, according to Thomson Financial.  

-- Reuters contributed to this report