Interesting Read below from todays paper:Fortescue judge queries...

Interesting Read below from todays paper:

Fortescue judge queries ASX rules

Chalpat Sonti, Perth

April 17, 2009

A JUDGE has questioned the Australian Securities Exchange's continuous disclosure rules, saying companies find it "very difficult" to abide by them when subjected to "spurious demands" in contractual talks.

Justice John Gilmour's remarks in the Federal Court in Perth came during civil proceedings brought by the Australian Securities and Investments Commission against Fortescue Metals Group.

ASIC contends that Fortescue and its founder, Andrew "Twiggy" Forrest, misled the market in 2004 and 2005 by referring to agreements it had signed with three Chinese companies to develop the infrastructure for its Pilbara iron ore project as "binding contracts" when they were merely memorandums of understanding.

Fortescue's share price dropped by more than 25 per cent in a day when the Chinese said publicly the agreements were not binding.

The court has heard evidence of a claimed vendetta against Fortescue by the Chinese, who the company claims were angry at not being offered a majority equity stake in the miner in return for their investment.

If found guilty of misleading the market, Mr Forrest faces being banned from acting as a director of Fortescue, in which he holds a $2.5 billion stake.

During a hearing into whether certain evidence was admissible, Justice Gilmour said he wondered whether companies were better managing such negotiations without informing the market.

"I think it raises very difficult (questions) for companies regarding continuous disclosure," Justice Gilmour said. "(When a) company raises spurious demands … not in good faith, is a company better to manage that internally or should it broadcast it to the world?"

ASIC wanted some evidence by Fortescue contractor Lawrence Xin ruled inadmissible as it occurred after the period when the market was supposedly not informed and was irrelevant, lawyer Joshua Thomson said.

Justice Gilmour said he did not fully appreciate the way ASIC was putting its case though "that might be more to do with me, Mr Thomson, than you".

He reserved his decision on the admissibility of the evidence.

Meanwhile, an expert witness called by ASIC told the court movements in Fortescue's share price after the first announcement in August 2004 could be put down to its effect. Fortescue shares jumped about 23 per cent, from 55¢ to 70¢, soon after the announcement that the company had signed a "binding contract" with the China Railway Engineering Corporation to build a railway from its mine to Port Hedland.

Under cross-examination by Fortescue lawyer John Karkar, QC, Andrew Sisson, the head of Melbourne-based Balanced Equity Management, said the price spike reflected investors' perception that the Fortescue project was then more likely than previously to proceed.

The number of Fortescue shares traded, which had been averaging 250,000 a day in the months before the announcement, surged to 420,000 in little over an hour. They later fell to finish the day at 59¢, a 7.3 per cent increase on the previous close.

"There was still uncertainty (whether the project would go ahead)," Mr Sisson said.

The hearing continues today.