(Beijing) – China has halted the launch of companies with names suggesting they provide financial services, as regulators examine existing firms to make sure they follow new requirements for conducting operations online.

The governments of Beijing, Shanghai and Shenzhen have temporarily halted the opening of firms whose name and scope of operations suggest they provide financial services, people close to the matter said.

Other local governments across the country will quickly follow suit, the sources said, as the central bank spearheads a campaign to bring the emerging Internet finance industry under control.

If the names of companies include words and phrases such as asset management, funds, investment, peer-to-peer lending, equity crowdfunding, Internet insurance and payment, they risk running afoul of the government.

Firms that describe themselves as engaging in these fields will not be able to register with local industry and commerce officials, meaning they cannot open, one official said.

"This is to guard market entry closely, so as to prevent and control risk at the root," he said.

It is unclear how long the freeze will last.

The suspension comes as financial regulators try to cope with a rise in firms that do not have a financial license, but act as if they do by touting investments and wealth management services online.

Police have busted several popular investment platforms and detained their executives on charges of fraud and illegally raising funds. Officials fear hundreds of billions of yuan from retail investors could have been lost.

The central banks has told financial regulators to work with local governments to examine all firms suspected of providing financial services online in a policy released on April 14.

Under the policy, regulators will soon unveil more detailed guidelines and principles, divided by sectors, for authorities to follow when assessing risk and responding to issues.

Policymakers aim to finish the check and establish a "negative list" approach to regulating Internet finance activity by the end of January, people close to the matter said.

The regulators are still working on the lists, but some red lines had been drawn for P2P lending and crowdfunding for equity investment.

The policy emphasized requirements laid out in previous regulations that prohibited P2P platforms from maintaining capital pools and selling repackaged private equity financial products to the public.

(Source: Caixin Online)