ASIC sues the ASX

In an unprecedented move the Australian Securities and Investments Commission (ASIC) has initiated Federal Court proceedings against the Australian Securities Exchange (ASX) alleging it made misleading statements around its Clearing House Electronic Sub-register System (CHESS) replacement project.

ASIC is alleging that 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.

ASIC alleges 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 and ASX did not have any reasonable basis to imply the project was on track to meet future milestones.

ASIC Chair Joe Longo said, “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.

“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.

Longo said ASX’s CHESS replacement is a technology project of fundamental significance, replacing critical national infrastructure 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.

‘We allege that the true state of affairs as at 10 February 2022 was that the project was not “progressing well”, contrary to ASX’s announcement.

“The delay and subsequent pause of the project in November 2022 caused significant cost to ASX and market participants who relied on assurances as to the progress of the project and scheduled go-live date.

“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 is yet to determine the penalty it will seek for ASX’s alleged contraventions.