Chinese authorities are limiting the number of stock accounts each investor could own in the A-share market, a move to curb illegal market activities.

Under the new regulation, individuals are only allowed to own up to three accounts in a single mainland market, a steep decrease from the previous 20, according to a statement by the China Securities Depository and Clearing Corp. (CSDC) posted on its website.

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Investors who own more than three active accounts will be allowed, but inactive accounts are considered dormant, the Wall Street Journal reported.

"The utilization rate for investors with more than three accounts is very low. The accounts have taken up too many technical resources," the company said in a statement, adding that some investors are taking advantage of multiple accounts by carrying out illicit activities.

The regulation immediately became effective following CSDC's announcement, China Daily reported.

"We believe the regulators have learnt the lesson... The key intention of this new rule is to remind investors that the crazy bull will not happen again," Judy Zhang, head of China banks and brokers at Citigroup in Hong Kong, said referring to China's market crash last year, which caused about a third of local Chinese investors to run and wiping away trillions of U.S. dollars in value.

Chinese securities regulators scrapped the "one person, one account" rule in 2015 to give investors' more freedom to manage their stock portfolios.

Meanwhile, the CSDC has also reportedly created a black list system to monitor illegal trading activities. It has penalized over 500 stock accounts involving more than 70 investors for irregular activities after it adopted a new policy in April that allows investors to own multiple accounts, the China People's Daily reported.

Tagsstock accounts, securities accounts, China Stock Exchange, stock exchange, China stock market