The Shanghai Composite Index tumbled 5.5% on Friday in the wake of fresh restrictions on brokers who China has deemed responsible for the bursting of the country's equity bubble this summer.
Three of the country's biggest securities firms are under investigation as regulators probe what they call "rule violations" that may have led to the plunge in stock values in August.
Shares in Citic Securities Ltd. and Guosen Securities Ltd. fell Friday by the 10% daily limit after both said they were being investigated. A third brokerage, Haitong Securities Ltd., issued a similar announcement after trading in its shares was suspended Friday morning.
Authorities have detained securities executives, an investment fund manager, government employees and a business reporter following the collapse in prices that began in early June. The announcements that brokerages themselves were under investigation represented a further widening of the probes.
The investigations were seen by many as an attempt by the ruling Communist Party to deflect blame for the 30% fall by the Shanghai index after state media encouraged the public to buy stocks.
Citic is China's biggest brokerage and part of Citic Group, the Cabinet's main holding company. Guosen and Haitong are among the country's 10 biggest securities firms.
In September, the police ministry announced Citic executives were suspected of insider trading and leaking sensitive information. The previous month, the official Xinhua News Agency said eight Citic employees and one current and one former employee of the market regulator were suspected of illegal stock trading.
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