In a statement on Wednesday, the Australian Securities and Investments Commission (ASIC) said it has commenced proceedings in the Federal Court against the ASX for allegedly making misleading statements related to its Clearing House Electronic Subregister System (CHESS) replacement project.
ASIC alleges statements made in ASX announcements on 10 February 2022 that the project remained “on-track for go-live” in April 2023 and was “progressing well” were misleading.
According to the regulator, these statements implied the project was tracking to ASX’s announced project plan and was on track to meet future milestones, including “go-live” in April 2023.
ASIC alleges those representations were misleading and deceptive because, at the time of the announcements, the project was not tracking to plan. Moreover, the regulator alleged that the ASX did not have any reasonable basis to imply the project was on track to meet future milestones.
“ASX’s statements go to the heart of trust in the integrity of our markets. We believe this was a collective failure by the ASX board and senior executives at the time,” said ASIC chair Joe Longo.
“Companies and market participants rely on what the ASX says about its operations to make their own decisions and investments. We expect the ASX to be a place to list and invest with confidence. When the ASX falls short, it has wide-ranging consequences across the market.”
Noting that the CHESS replacement project is of “fundamental significance”, Longo added that replacing critical national infrastructure is crucial to the operation of the Australian economy.
“Its critical importance was all the more reason ASX needed to ensure it told the Australian public the truth about how the project was tracking and whether it would be completed on time,” Longo said.
“We allege that the true state of affairs as at 10 February 2022 was that the project was not ‘progressing well’,” the chair said, adding that this delay caused “significant cost to ASX and market participants”.
“The CHESS replacement project must be managed effectively and transparently. Failure to do so can lead to a lack of confidence in Australia as a market to attract investment,” Longo said.
ASIC confirmed it is yet to determine the penalty it will seek for ASX's alleged contraventions.
The ASX first admitted that there was a strong likelihood of delay to the go-live date of April 2023 in March 2022, before announcing a pause to the CHESS Replacement Project in November of that year. Late last year, the ASX said it would proceed with a product-based solution that will be delivered by global technology provider Tata Consultancy Services (TCS) instead of its original plan.
In March this year, the ASX paid a penalty of $1.05 million following an ASIC investigation into its compliance with the market integrity rules.
Responding to the suit in a bourse listing, the ASX's managing director and CEO, Helen Lofthouse, said: “We recognise the significance and serious nature of these proceedings. We cooperated fully with ASIC’s investigation and are now carefully reviewing and considering the allegations.
“We play a critical role at the centre of Australia’s financial markets, and continue to focus on supporting and delivering for customers. We are committed to taking ASX forward, and have made strong progress as an organisation over the past two years.”
