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UPDATE 1-China regulator resumes securities firm approvals, issues new rules

(Recasts, adds detail)

BEIJING/SHANGHAI, July 5 (Reuters) - China's securities regulator released new equity management rules for securities companies on Friday, while saying it would resume approvals for the establishment of domestically funded securities firms.

The China Securities Regulatory Commission (CSRC) will check the source of funds used to establish securities firms, and ban the use of entrusted funds for that purpose, Chang Depeng, a spokesperson for the regulator, said at a regular news briefing on Friday.

Wealth management products will also be banned from holding shares in securities firms or becoming controlling stakeholders in the companies, Chang said.

Shareholders in securities firms will not be allowed to pledge shares during their lockup period, and will not be permitted to pledge more than 50% of shares after that period.

Comprehensive securities firms that fail to meet requirements including restrictions on asset size will be granted a five-year grace period, Chang said.

Companies still not meeting requirements after five years will not be allowed to continue pledged-share repurchase, stock futures market making, and other high-risk businesses, he said. (Reporting by Xiaochong Zhang in BEIJING and Winni Zhou and Andrew Galbraith in SHANGHAI; Editing by Kim Coghill)