China's securities regulator said it would severely punish shareholders who illegally reduce holdings in listed companies, and that it has started investigating 52 suspected cases.

As part of efforts to stem a market slide that started mid-June, China has banned the sale of shares by shareholders owning stakes in companies amounting to 5 percent or more.

The China Securities Regulatory Commission on its micro blog said it has completed investigations in 20 cases and would punish shareholders who committed violations.

The announcement came as China's stock market slumped over 11 percent.