ASX (ASX:ASX) presented its defense today in relation to proceedings brought by the Australian Securities and Investments Commission (ASIC).
In mid-August ASIC alleged in a Federal Court appeal that the ASX had misled investors. ASIC said that, in February 2022, ASX had incorrectly stated that the planned blockchain-based upgrade to the company’s Clearing House Electronic Subregister System (CHESS) was “on track for go-live” in April 2023 and ” It was going well.” ASIC argues that these statements misrepresent the actual status of the project, arguing that ASX had no reasonable basis to imply that it would achieve its stated milestones.
ASIC president Joe Longo said ASX’s statements “go to the heart of confidence in the integrity of our markets”, underlining the importance of transparency, especially in projects critical to the nation’s financial infrastructure. Longo highlighted the impact of ASX’s statements on market participants who rely on ASX guidance to make investment decisions, and noted the financial and operational repercussions following the delay and eventual disruption of the project.
In today’s announcement, ASX chief executive Helen Lofthouse said that while ASX accepts the disruption caused by the CHESS delays, the company had “a reasonable basis” for its 2022 filings given the information available to the era. It added that ASX has since taken steps to re-evaluate the project, commissioning independent reviews and establishing a CHESS replacement partnership program to guide future implementation of the project.
CHESS is a system for recording and settling stock transactions. It has been in use since 1994, but is obsolete and needs to be replaced. ASX decided to replace CHESS in early 2016, hiring a company called Digital Asset in 2017 to build a new blockchain-based system. However, after delays and defects found, the project was suspended in November 2022 and subsequently abandoned. Approximately $250 million had been invested.
ASX shares are trading 1.17% higher at $66.55.