ASIC Takes Action Against ASX Over Alleged Misstatements About CHESS Replacement Project

ASIC Takes Action Against ASX Over Alleged Misstatements on Critical Infrastructure Project

In a bold move that sent shockwaves through the financial markets, ASIC has taken legal action against the Australian Securities Exchange (ASX) over alleged misstatements regarding the progress of a critical infrastructure project.

Joe Longo, ASIC’s chairman, minced no words when he declared that the ASX statements in February 2022 went “to the heart of trust in the integrity of our markets.” He emphasized the seriousness of the proceedings, stating that they were a strong message to both the market and ASX that accountability would be enforced for what ASIC considered serious misstatements.

The crux of the issue lies in ASIC’s allegations that the CHESS replacement program, a crucial project for the ASX, was not progressing as claimed by the exchange in February 2022. The subsequent delay and pause of the project in November of that year resulted in significant costs for ASX and market participants who had relied on assurances about the project’s progress.

ASX chief executive Helen Lofthouse acknowledged the gravity of the situation, stating that the company was fully cooperating with ASIC’s investigation and carefully considering the allegations. She assured that ASX would keep the market informed in accordance with its disclosure obligations.

Despite the legal action, Mr. Longo expressed confidence in ASX’s ability to uphold market integrity and deliver the new CHESS project. He emphasized that the proceedings were not intended to distract or undermine ASX’s efforts in this regard.

The ASIC action, which targets the company rather than individual directors, is seen as a collective failure of the board and senior executive team. ASIC deputy chairwoman Sarah Court explained that the evidence did not support pinning individual liability on directors after a thorough 15-month investigation.

The legal action against ASX comes on the heels of a devastating report from Accenture, which highlighted issues with the CHESS replacement project, including uncertain timelines, excessive complexity, and communication problems with the technology developer. The report, released in November alongside ASX’s admission of project problems, raised concerns about governance and oversight within ASX.

This is the second legal battle for ASX this year, following a separate case in March where ASIC fined the exchange over 8000 rule breaches related to an “order information transparency failure.” ASIC has since required ASX to commission special reports to audit its governance processes and has imposed strengthened licensing conditions on the exchange.

The outcome of ASIC’s legal action against ASX remains to be seen, but the implications for the financial markets and the integrity of critical infrastructure projects are significant. The case serves as a stark reminder of the importance of transparency, accountability, and trust in maintaining the integrity of Australia’s financial markets.