Lengthy talks end as the regulator's contract is extended for two years Securities and Futures Commission (SFC) chairman Andrew Sheng will remain on the job for another two years after the government agreed to extend his contract, putting an end to protracted negotiations which had left his future at the regulatory body in doubt. Mr Sheng's present contract was to expire on Tuesday. A deadlock between the government and Mr Sheng was resolved after Financial Secretary Henry Tang Ying-yen agreed to extend the regulator's contract for two years, a senior government source told the South China Morning Post yesterday. The government had offered him a one-year contract in June, but Mr Sheng did not accept because the term was too short to implement continuing market reform plans. Mr Sheng had asked for a two- or three-year contract. According to the government source, Mr Tang wanted a 'more experienced' person to head the regulatory body. Antony Leung Kam-chung was the financial secretary when the government offered Mr Sheng the one-year term. 'Now we have Mr Tang as the new financial secretary and he has a different opinion' on who should be the commission chairman, the source said. 'The current challenge for Mr Tang is to recharge the economy and solve the budget deficit problem. Against this backdrop, the SFC should have a more experienced person on board.' Last month, Mr Tang convinced Hong Kong Exchanges and Clearing chairman Charles Lee Yeh-kwong to drop his retirement plans and stay until 2006. Mr Sheng, a Malaysian and former World Bank official, has headed the SFC since 1998 after serving five years as deputy chief executive of the Hong Kong Monetary Authority. When his original three-year contract ended in 2001, it was renewed for two years. Mr Sheng yesterday did not comment on his appointment yesterday. An SFC spokesperson also refused to comment. Another government source said the appointment was awaiting the signed approval of Chief Executive Tung Chee-hwa before a formal announcement would be made. Mr Sheng's relationship with the government has passed through many ups and downs. Government officials were delighted by his efforts in getting the Securities and Futures Ordinance passed by legislators in March last year, ending a 10-year battle over the subject. The new law, which came into effect in April, toughens rules on shareholder disclosures and criminalises insider dealing. But the relationship turned sour in May last year after Mr Sheng issued a public letter in response to a newspaper advertisement in which a group of investors urged the SFC to intervene in transactions allegedly unfair to small investors. The SFC chairman told the group it should not expect the commission to intervene. He said if the deals were 'purely an issue of competence or a history of bad decision-making impacting on value, and the rules have not been violated, the practical remedy for investors may be to sell' their shares. At the time, government officials told the Post they disapproved of the letter and said the SFC should take a tougher stance. The penny-stock fiasco followed in July last year, in which the SFC helped HKEx prepare a consultation paper on the delisting of low-priced stocks - only to see investors dump them in panic. At the same time, a series of anonymous letters sent to the media alleged Mr Sheng had helped a staff member to avoid paying taxes. A report into the penny-stock debacle in September last year said Mr Sheng was not responsible. A PricewaterhouseCoopers report issued in March cleared him of the allegations raised in the anonymous letters.