Beijing (Caixin Online) — A resurgence of illegal behavior in various trading platforms across China has again caught the attention of regulators and led to a fresh round of investigations into local government-backed exchanges.

A task force led by the China Securities Regulatory Commission (CSRC) has found that a number of exchanges have engaged in a series of malpractices recently, the securities regulator said Tuesday night. The CSRC did not name the exchanges.

“Malpractices at some exchanges have risen again from the ashes, and they have used a smorgasbord of tricks to break laws and violate regulations,” according to the statement.

The wrongdoings include illegal fundraising scandals, manipulating market prices and luring investors who don’t have enough risk tolerance into the market, the CSRC said. But the task force lacks legal teeth and can only provide enforcement recommendations to local governments.

To rein in the loosely regulated exchange platforms, the task force has ordered related government agencies to conduct a fresh round of surveillance together with local governments.

“ “Malpractices at some exchanges have risen again from the ashes, and they have used a smorgasbord of tricks to break laws and violate regulations.” ” — China Securities Regulatory Commission

The CSRC’s latest rectification meeting on Monday and subsequent statement on Tuesday shed light on rampant regulatory breaches at China’s numerous trading platforms that local governments establish to supplement their coffers.

In recent years, hundreds of ill-regulated local trading platforms for products as diverse as fine art, stamps and nonferrous metals have sprung up across the country with permission from local authorities. Lax regulations mean that barely qualified traders armed with a few computers can set up an exchange with limited initial funding, media reports show.

“The idea of having an exchange appeals to local authorities as it generates high yields with low costs,” a local government official told Caixin.

In the CSRC statement, the task force admonishes local governments for “blindly and repeatedly” setting up exchanges and rushing to create trading platforms for bills of exchange before the opening of a national trading platform in December.

Rout blamed on irregularities

The efforts to crack down on local government-backed exchanges dates back to 2011 when the State Council, China’s cabinet, decided to set up the task force, which ordered local governments to clean up exchanges in their turf.

China again put its exchanges under greater scrutiny after blaming a stock market rout in 2015 on widespread irregularities. However, previous campaigns haven’t managed to root out malpractice entirely.

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In late 2015, Fanya Metal Exchange, a trading platform for nonferrous metals based in Kunming, Yunnan province, made headlines when it failed to pay back 43 billion yuan ($6.2 billion) to 220,000 investors. It is one of the largest illegal fundraising scandals to date.

The task force’s recommendations have at times also been ignored by local governments. In an earlier interview with Caixin, Chen Bofeng, a CSRC official, said whether the task force’s orders are carried out depends on the willingness of local governments, as many exchanges were approved and under the protection of local authorities.

See this report at Caixin Online. Follow Caixin on Twitter at @caixin.