ASIC has commenced proceedings in the Federal Court against Australia’s largest market operator, ASX Limited, for allegedly making misleading statements related to its Clearing House Electronic Subregister System (CHESS) replacement project.

ASIC alleges 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.

Mr 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,’ Mr Longo said.

ASIC is yet to determine the penalty it will seek for ASX's alleged contraventions.

On 7 March 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. These proceedings underscore ASIC's commitment to ensuring all market participants comply with the law.

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Concise statement

Originating application

Background

Ensuring the ASX has complied, and is complying, with its legal obligations is critically important to maintaining confidence in the integrity of the market given the important role ASX plays in developing and issuing recommendations on the corporate governance practices to be adopted by listed companies and is responsible for the governance of critical national infrastructure.

On 28 March 2022, approximately six weeks after making the statements, ASX announced that there was a strong likelihood of further delay to the go-live date of April 2023. Following that announcement, ASX engaged Accenture to undertake a review of the project.

That review identified significant challenges with the solution design and its ability to meet the ASX’s requirements. Following the release of the Accenture Report, ASX decided to pause the project and wrote down costs of $250 million.

CHESS replacement project timeline

Editor's Note:

On 9 September 2024, orders were made for the progression of the proceeding. The case management hearing on 10 September 2024 was vacated. The proceeding has been listed for a further case management hearing on 4 December 2024 (Orders made on 9 September 2024).