The legal affairs office of the State Council, China's Cabinet, recently issued a draft regulation on fighting illegal fund-raising to solicit public opinion. The regulation is aimed at protecting people's legal rights, and maintaining economic security and social order.

The draft regulation was issued after police found online peer-to-peer broker Ezubao had cheated about 900,000 investors of more than 50 billion yuan ($7.6 billion) by luring them into fake investment projects. And an executive of the broker's parent company has admitted the brokerage was nothing but a Ponzi scheme.

P2P lending platforms have mushroomed across the country, because the difficulty in getting funds from banks prompted fundraisers to seek out individual investors with promise of high returns on their investments.

Official data show more than 2,600 P2P lending platforms in China had raised a total 400 billion yuan in funds, with about 30 percent of those lending platforms violating financial rules and having operational problems, which made them highly risky.

The draft regulation says agencies and local governments should crack down on illegal fund-raising platforms to prevent systemic financial risks. It also says a long-term risk prevention mechanism should be established and the authorities must take measures to improve financial services, guide informal financing platforms and root out illegal fund-raising.