ASIC has sued ASX for allegedly misleading statements made about its Clearing House Electronic Subregister System (CHESS) replacement project. It calls for declarations, pecuniary penalties, an adverse publicity order and a monetary fine to be issued.
In February 2022, ASX stated that CHESS was “on-track for go-live” in April 2023 and “progressing well”. ASIC alleges that these announcements were “misleading and deceptive”, as the project was not on schedule when they were released, and ASX had no reasonable basis to imply it would meet future milestones.
Just a month later, in March 2022, ASX stated that there was a strong likelihood of a delay to the go-live date. In November of that year, after more than eight years of development, the project was officially paused.
Statements made by ASX go against certain sections of the ASIC Act 2001 in relation to misleading or deceptive conduct and false or misleading representations, the commission alleges.
Joe Longo, ASIC chair, discussed the reputational impact on trusted industry bodies. “‘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.”
He continued: “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”
Work on the CHESS Replacement Project has cost ASX and market participants considerably – to the tune of an AUS$250 cost derecognition. ASIC has not yet decided the penalty it will issue for the allegations.
The CHESS replacement is of “fundamental significance”, Longo noted, “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. 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.”
ASX has since begun work on a second replacement system, which is expected to be live in 2029. Most recently, it has issued one of its final two consultation papers to determine the scope and implementation of the project.
On the claims, Helen Lofthouse, ASX managing director and CEO, 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.”
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