The investment failure of a wealth management product sold by a bank employee in Shanghai highlights the potential risks in China's huge wealth management market.

The case came under the spotlight when investors protested after finding that they could not take back their investments late last month when the first batch of the wealth management product matured.

Pu Tingting, an ex-employee at Jiading branch of Huaxia Bank in Shanghai, allegedly sold the product at the bank office, promising annual returns of up to 13 percent.

Pu has been sacked for what the bank said "selling privately," but investors said that the branch was aware of the wealth management product sales totalling 320 million yuan ($51.4 million).

Dozens of investors have been protesting in front of Huaxia Bank's Shanghai and Jiading branches over the past few days, demanding their investment be repaid.

Some of the investors are in their 70s, who invested millions of yuan in the wealth management product sold privately by Pu.

The money raised through the underground private equity went to pawn shops and car dealers in the central province of Henan.

Ma Minghua, 51, planned to buy a wealth management product that matures in six months with an annualized earnings ratio of 5.8 percent, but was persuaded to invest 1.1 million yuan in the illegal fund.

"They (the bank's wealth management managers) said the fund would be invested in high-speed railways and there were no risks at all," Ma told Xinhua.

Police authorities and banking regulators in Shanghai, Beijing and Henan are currently investigating whether this was an illegal fund raising case.

The investment default has sparked concerns on risk control of the country's fast-expanding asset management market. The China Banking Regulatory Commission has held a meeting alerting banks of the potential risks.

"The Huaxia Bank's case shows that in some banks, there are loopholes in internal risk control and supervision and in the meantime, misleading sales are everywhere," said the head of the personal finance department at a local Shanghai bank, who declined to be named. "All this means is that there might be risks lurking in the wealth management products sold at these banks."

Xiao Gang, chairman of the Bank of China, wrote in an article in October that some banks sold new wealth management products to repay matured ones and this was in essence a Ponzi scheme.

Over the past couple of years, Chinese banks have sold a large number of wealth management products promising higher earnings to help absorb funds from customers who were unwilling to put their savings into the low-yielding bank deposits.

The wealth management funds sold by the country's banking sector totalled 12 trillion yuan by the end of September, accounting about 13.3 percent of the country's outstanding Renminbi deposits, according to the international rating agency Fitch Ratings and the People's Bank of China, or the central bank.

The investment default also showed that many savers lack awareness of the potential risks in wealth management products sold at banks, experts said.

Zhao Qingming, a senior researcher at the China Construction Bank, said that the case would lead to more formal information disclosures in the wealth management market and strengthened supervision of commercial banks.