ASX readies response to landmark ASIC court action

The ASX is due to lodge a response with the Federal Court in under three weeks to damning allegations that it misled investors, amid little sign that settlement deliberations are underway.

ASX CEO Helen Lofthouse and chairman Damian Roche.

The ASX is due to lodge a response with the Federal Court in less than three weeks to damning allegations by the corporate regulator that it misled investors, amid little sign that settlement deliberations are under way.

The Australian Securities & Investments Commission began a legal case against the ASX in August alleging a “collective failure” by its board and executives to keep investors, stakeholders and the public properly informed on a CHESS replacement project.

ASIC claims statements made by the exchange operator in February 2022 were “misleading and deceptive” around how its CHESS technology upgrade project was tracking. Under the current court schedule, ASX is required to lodge a response to ASIC’s claims by November 14.

The parties are back in court for a case management hearing on December 4.

Sources said engagement between the parties had largely been document-related and minimal, suggesting a settlement is not currently a priority. “As the matter is before the court, ASIC is unable to comment,” a spokesman said. An ASX spokeswoman declined to comment.

The ASX may face penalties of hundreds of millions of dollars if it loses the case. The exchange’s board will front investors on Monday at the company’s annual general meeting, where the company is alert to the threat of a strike against its pay report.

Influential proxy group Institutional Shareholder Services broke ranks with its peers and urged investors to vote against the report.

Former banker David Clarke will helm the board following the AGM.

Finclear spent well over $10m preparing for the initial CHESS replacement, with boss David Ferrall noting he was keeping his options open as to whether to sue ASX over its failure. “We would reserve all our rights until the ASIC investigation is concluded,” he said.

Clime Investment Management chairman John Abernathy said he was concerned the ASX had invested so much in its CHESS replacement scheme, after the market operator wrote off $250m from the bungled project and flagged further and new spending to replace the system with a Tata Consulting BaNCS platform.

“You don’t speculate capital when you’re that sort of company,” he said. “You invest in some proven technology; why would you try and build something from scratch?”

Mr Abernathy said the ASX should look to settle the case with the corporate regulator, saying a legal fight between the two risked torching more shareholder value and government dollars.

The ASX has signalled that because the court proceedings are at an early stage the company “cannot reliably estimate any potential future financial impact” of ASIC’s action.

Originally published as ASX readies response to landmark ASIC court action