HONG KONG (MarketWatch) — Chinese stocks dived the most in over six years Monday, with a wide sell-off sweeping across the financial sector as investors turned jittery over the latest move by securities regulators to clean up the margin-trading business.

The benchmark Shanghai Composite Index SHCOMP, +2.06% plunged 7.7% to close at 3,116.35, posting its biggest daily percentage decline since June 2008 . Prior to Monday’s heavy loss, the index was up 4.4% for the month to date, extending gains after finishing 2014 with a sharp 53% advance.

The plunge in mainland China helped to push Hong Kong’s benchmark Hang Seng Index HSI, +0.47% down 1.5%, with the Hang Seng China Enterprises — which tracks Hong Kong-listed mainland Chinese companies — off 5%.

The China Securities Regulatory Commission, the nation’s top market watchdog, announced Friday that a dozen brokerage firms had been punished for violations of margin-trading rules after a two-week overhaul. Infractions included allowing customers to delay margin repayments by longer than currently allowed.

The three most severely punished brokers were Citic Securities Co., Haitong Securities Co. and a unit of Guotai Junan International Holdings Ltd., which were all banned from opening new customer accounts for three months.

The A-shares of both Citic Securities 600030, +4.35% 6030, +2.36% , which is owned by financial giant Citic Group, and Haitong Securities 600837, +3.32% 6837, +2.83% were suspended from trading after falling limit-down by 10%.

Other financial stocks, including banks and insurances, were also under heavy selling pressure in Shanghai.

China Citic Bank Corporation Ltd 601998, +1.76% , another listed subsidiary of Citic Group, Bank of China Ltd. 601988, +0.93% 3988, +0.40% BACHY, -0.24% , Industrial & Commercial Bank of China Ltd. 601398, +0.81% 1398, +0.23% IDCBF, -3.39% and Agricultural Bank of China Ltd. 601288, +0.94% 1288, +1.59% ACGBF, -1.40% all hit the 10% daily price-drop limit.

Among major insurers, China Life Insurance Co. Ltd. 601628, +10.01% 2628, +4.50% LFC, +3.29% and Ping An Insurance Group Co. 601318, +4.92% 2318, +2.38% PNGAY, +1.55% likewise saw their A-shares suspended after their price falls exceeded the daily limit.

The Chinese financial sector in Hong Kong market didn’t escape the sharp sell-off either. Major underperformers included Haitong Securities (down 16.5%), Citic Securities (down 16.5%), Shenyin Wanguo HK Ltd. 218, +2.15% (down 15%), and China Galaxy Securities Co. 6881, +3.81% (down 13.2%).

Also affecting sentiment was a fresh fall in home prices across China’s major cities.

Among the Shanghai-listed shares of top mainland Chinese developers, both Gemdale Corp. 600383, +4.88% and Poly Real Estate Group Co. 600048, +4.26% gave up 10%.

Among the real-estate names listed in Hong Kong, China Vanke Co. 2202, +2.01% retreated 6.3%, China Overseas Land & Investment Ltd. 688, -0.24% CAOVF, lost 3.5%, and China Resources Land Ltd. 1109, +0.83% CRBJF, +6.31% dropped 3.1%.

However, other Asian markets were boosted by a rebound in the U.S. stocks at the end of last week. Japan’s Nikkei Average NIK, +0.17% ended up 0.9%, and the broader Topix tacked on 0.6%.