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 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 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 , which is owned by financial giant Citic Group, and Haitong Securities 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 , another listed subsidiary of Citic Group, Bank of China Ltd. (BACHY), Industrial & Commercial Bank of China Ltd. (IDCBY) and Agricultural Bank of China Ltd. (ACGBF) all hit the 10% daily price-drop limit.

Among major insurers, China Life Insurance Co. Ltd. (LFC) and Ping An Insurance Group Co. (PNGAY) 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. (down 15%), and China Galaxy Securities Co. (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. and Poly Real Estate Group Co. gave up 10%.

Among the real-estate names listed in Hong Kong, China Vanke Co. retreated 6.3%, China Overseas Land & Investment Ltd. (0688.HK) lost 3.5%, and China Resources Land Ltd. (CRBJF) 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 ended up 0.9%, and the broader Topix tacked on 0.6%.