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ASX Ltd: Watchdog investigates sharemarket operator over failed tech project
ASX Ltd: Watchdog investigates sharemarket operator over failed tech project
March 29, 2023 — 4.16pm
The corporate watchdog is investigating whether market operator ASX Ltd or its directors breached corporate laws in their handling of a failed technology project to overhaul critical financial infrastructure.
In a sign of further fallout from a long-running project that was junked last year, ASX Ltd on Wednesday revealed it was under investigation by the Australian Securities and Investments Commission over the CHESS replacement project.
ASIC is investigating the ASX over potential breaches relating to the ill-fated CHESS replacement project.CREDIT:AFR
The project had attempted to replace the ASX’s core clearing and settlement system with blockchain-based technology, but it was beset by repeated delays. Last November, the company dumped the project, resulting in
$255 million in charges.
The ill-fated project has sparked tougher regulatory scrutiny of ASX Ltd, with the country’s top financial regulators last year blasting the company over the failure, and demanding ASX Ltd produce a series of reports.
Now, ASIC was investigating “suspected contraventions” of corporate laws, ASX Ltd said. It said the watchdog would consider whether ASX Ltd, and/or its officers and directors had breached various sections of the Corporations Act, including those relating to continuous disclosure, misleading and deceptive conduct, and false or misleading statements. The regulator was also investigating whether there were breaches of the ASIC Act, including sections dealing with misleading and deceptive conduct and false or misleading representations.
ASX chief executive Helen Lofthouse has said the company needed to revisit the design of the CHESS project.CREDIT:MICHAEL QUELCH
ASX said the probe into suspected contraventions would look at ASX Ltd’s oversight of the CHESS replacement project, and statements and disclosures it had made on the status of the program. “ASX takes its obligations very seriously and will co-operate fully with ASIC,” ASX Ltd said.
ASX Ltd, as well as operating key financial market infrastructure, is also responsible for monitoring and enforcing compliance with the market’s listing rules, which include rules on continuous disclosure. ASX Ltd has a distinct compliance division that handles the compliance of listed companies. ASIC is responsible for supervising ASX and monitoring ASX’s compliance with the listing rules.
Despite ASIC’s investigation, investors did not appear overly worried about the potential impact on ASX, with its shares rising 0.2 per cent to $64.75 by late afternoon.
An ASIC spokesman confirmed the investigation but did not comment further on the matter. “ASIC acknowledges today’s market announcement by ASX Ltd and confirms that it has commenced an investigation as referred to in the announcement,” he said.
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ASX received the news of ASIC’s investigation on Tuesday night, and on Wednesday ASX Ltd chief executive Helen Lofthouse addressed staff in a meeting on the matter. When the company announced it was dumping the project last year, Lofthouse said it had become clear the company needed to revisit the design of the CHESS project.
CHESS, a system developed in the 1990s, is used to underpin trading on Australia’s sharemarket. In 2015, ASX Ltd started looking at replacement options. In 2016, it selected a partner to develop and test a platform that would use distributed ledger technology.
But
the ambitious program was repeatedly delayed before being abandoned in November, a move that left other firms in the financial sector frustrated after the investments they had made in the project. In February, ASIC ordered ASX Ltd to provide two extra reports on the bungled project.
Regulators had also previously said they were considering further action.
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