ASIC Sues Australian Stock Market Operator ASX Over Misleading Software Upgrade Claims

Australian Stock Exchange Sued by Regulator Over Misleading Software Upgrade Claims

In a shocking turn of events, the Australian corporate regulator has taken legal action against the country’s stock market operator, ASX, alleging that it misled the public about the progress of a troubled software upgrade. The Australian Securities and Investments Commission (ASIC) has accused ASX of undermining financial market integrity and investor confidence with its misleading statements.

The lawsuit, seeking unspecified fines, comes after ASX flagged in a February 2022 trading update that it was on track to switch to a new blockchain-based clearing and settlement platform the following year. However, the project was ultimately shelved in November 2022 after years of delays and consultation with market participants.

ASIC chair Joe Longo described the software upgrade as a “collective failure” by ASX’s board and senior executives, highlighting the risks and delays that were known internally but not disclosed to the public. The regulator also criticized ASX for giving out corporate governance recommendations to listed companies while failing to uphold those principles in its own operations.

ASX CEO Helen Lofthouse, who took over in August 2022, acknowledged the seriousness of the allegations and stated that the company was reviewing ASIC’s claims. Following the news of the lawsuit, ASX’s shares dropped by as much as 4%, underperforming the broader market.

The long-delayed software overhaul, initially announced in 2016, aimed to upgrade ASX’s settlement and clearing platform with blockchain technology. However, the project faced numerous setbacks, with the current supplier, Tata Consultancy Services, now expecting completion by 2029.

In the lawsuit, ASIC revealed that ASX’s initial software vendor, Digital Asset (DA), had warned of delays as early as July 2021. Despite this, ASX continued to provide misleading updates to the public, leading to a loss of confidence in the Australian financial markets.

The lawsuit also highlighted a lack of oversight by ASIC, which was criticized by a Senate inquiry for failing to anticipate the problems with the ASX upgrade. ASX is set to announce its annual profit on Friday, amidst the ongoing legal battle with the regulator.

The outcome of this lawsuit could have far-reaching implications for ASX and its reputation in the financial industry. Investors and market participants will be closely watching as the case unfolds, eager to see how this controversy will impact the future of Australia’s stock market operator.