BEIJING, March 21 -- China mainland's stock watchdog issued rules Tuesday to ban listed firms from using share-sale proceeds to invest in securities as the mainland moves to curb potential bubbles in the market.

Public firms can't use the fund s they collect from stock issuance to subscribe to new share sales, the China Securities Regulatory Commission said in a Website statement.

Mainland-listed companies also can't use the proceeds to trade existing stocks, convertible bonds and proposed financial derivatives, according to the statement.

Clarification

The raised capital, planned to be used to replenish working capital, can only apply to the firms' core businesses, the statement said.

"Listed firms must beef up internal-control systems to store, use and manage the proceeds," the regulator said.

"They should clarify risk-management measures and the information-disclosure process."

A listed firm must seek shareholders' approval if it plans to use more than 10 percent of a stock sale to shore up working capital, the statement said.

The stock regulator also said it will rev up oversight of the use of companies' equity-sale proceeds.

Any firm and people responsible for violating rules to invest the raised funds in stocks face prosecution.

So far this year, more than 20 listed companies have used 10 billion yuan (1.29 billion U.S. dollars) from their stock-sale proceeds to apply for mainland initial public offerings, the Securities Times reported last week.