China's securities regulator said on Friday that it is working on a set of rules to guard against risks in funds raised on Internet.

Zhang Xiaojun, spokesman for the China Securities Regulatory Commission (CSRC), said some Internet fund managers, raisers and clearers didn't warn investors enough of the risks or deal well with them.

Some funds didn't clarify to their clients that funds are different from bank deposits and don't ensure minimum returns, according to Zhang.

"China needs to step up risk management to better protect investors' interests and ward off systematic risks," said Zhang.

Internet finance is burgeoning in China and the funds raised through Internet usually flow to the money market.

Alibaba's Yu'E Bao (Leftover Treasure), one of the country's most popular Internet finance products, allows customers to invest any balance on their account in a money market fund with much higher returns than bank deposits.