The majority of mainland stocks declined on Friday, with the benchmark Shanghai Composite Index falling 1.59 percent to close at 4,308.69 points. [Yu Fangping/China Daily]

The securities regulator on Friday broadened the investment scope for money market funds in an attempt to encourage innovation while maintaining effective risk management.

Deng Ge, spokesman for the China Securities Regulatory Commission, said the CSRC will support the exchange listing and share transfer of money market funds. It will also improve regulation on sales and disclosure of funds that appear online.

Money market funds tend to invest in short-term debt securities that are usually less than a year. They are considered safe options with investors, with low risk but low returns.

At a news conference, Deng said investors would be consulted and that modifications to the new regulations could be made later.

In another key development, the CSRC denied media reports that claimed it had been investigating fund management companies that violated contracts by excessively boosting their position in small-cap companies listed on the startup board ChiNext.

The reports also said that the regulator had asked fund managers to reduce exposure in the board because of the rapid rise in stock prices.

"The reports are false," Deng said. "The CSRC will regulate the market according to the law and it does not intervene in the investment operation of funds."

Media reports had triggered a fall in the ChiNext, a NASDAQ-style board of the Shenzhen Stock Exchange. But on Friday it rebounded by 0.12 percent to close at 3,145.34 points.

Still, the majority of Chinese stocks tumbled on Friday, with the benchmark Shanghai Composite Index falling 1.59 percent to close at 4,308.69 points.

In a separate statement, the CSRC clarified several legal points for overseas investors in mainland stocks.

The move is likely to pave the way for the much-anticipated Shenzhen-Hong Kong Stock Connect. This will be similar to the trading link between Shanghai and Hong Kong.