ASIC has taken the Australian Stock Exchange (ASX) to Federal Court for allegedly making misleading statements relating to its Clearing House Electronic Subregister System (CHESS) replacement project.
CHESS is a computer system designed to facilitate share trade settlements and record shareholdings. Around two dozen apparel, footwear and accessories business are listed on the ASX, including Mosaic Brands, Universal Store and Premier Investments.
ASIC alleges statements made in ASX announcements on February 10, 2022 that the CHESS 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.
"ASX’s statements go to the heart of trust in the integrity of our markets," ASIC chair Joe Longo said. "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."
ASIC is yet to determine the penalty it will seek for ASX's alleged contraventions.
On March 7, 2024, ASIC announced ASX had paid a penalty of $1,050,000 following an ASIC investigation into its compliance with the market integrity rules. More recently, ASIC took action against a ‘pump and dump’ scheme and attempted manipulation of commodities markets.
The ASX has since released a statement, saying the proceedings follow a broad ranging investigation by ASIC into suspected contraventions of the ASIC Act 2001 and the Corporations Act 2001 in relation to the previous CHESS replacement project, which was paused in November 2022.
“We recognise the significance and serious nature of these proceedings," ASX managing director and CEO Helen Lofthouse said. "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.”