ASIC commissioners ‘utterly failed’ on Nuix

Australia’s most senior corporate regulators have been accused under parliamentary privilege of a conflict of interest over a company that’s wiped out nearly $3bn in ASX investor wealth.

Labor senator Deborah O'Neill speaking in parliament.

ASIC commissioners failed their duties in waving through Nuix’s diabolical IPO that has destroyed nearly $3bn in investor wealth according to Labor senator Deborah O’Neill, who has used parliamentary privilege to accuse the nation’s most senior corporate regulators of significant conflicts of interest.

Nuix lost its two top executives this week marking a stunning fall from what was the biggest IPO of 2020, with the software company plagued by corporate governance scandals, two earnings downgrades and three profit warnings.

In a speech made Thursday evening in parliament, Ms O’Neill said Nuix’s float was a ‘billion dollar payday’ for its chief backer Macquarie Group, of which a top ASIC commissioner was a former executive. She said the float cost Australian investors billions in a disintegration that has had catastrophic consequences.

The Australian first revealed that regulators including ASIC deputy chair Karen Chester were warned in November from a high-level Nuix insider that the prospectus was riddled with dangers for investors. Those warnings were repeatedly ignored.

Ms O’Neill said Aperion Law sent three separate letters to ASIC commissioners detailing its concerns including questionable financial forecasts, which did not receive a response from the commissioners, one of whom was a former Macquarie executive.

“Commissioner Cathie Armour was sent a detailed list of the issues with the Prospectus. Armour was the General Counsel of Macquarie Capital before taking her role as a Commissioner,” Ms O‘Neill said. ”That is the very same Macquarie Capital that made almost $600m off this IPO.”

“Why did Commissioner Armour not investigate? What contact did she have from Macquarie in regard to this IPO that led her to such a complete abdication of responsibility in this regard?”

ASIC declined to comment.

The corporate regulator took just 12 days to give the Nuix float its seal of approval and branded a crucial section of the disastrous Nuix prospectus around internal financial risks control as “not controversial”.

Nuix CEO Rod Vawdrey speaks at the Australian Stock Exchange (ASX) in Sydney. Picture: NCA NewsWire/Bianca De Marchi

Ms O’Neill added that acting ASIC chair Karen Chester “utterly failed in her duties” with regards to Nuix.

“I have heard from whistleblowers that she was too busy dealing with the internal politics of ASIC, manoeuvring to become a permanent Chair and building her own cliques within ASIC, rather than effectively prosecuting the job she was hired to do.

“The failure of ASIC to appropriately regulate Nuix’s IPO has had catastrophic consequences for all but Macquarie Bank, the Nuix and Macquarie executives in the know and offshore banks in tax-friendly Vanuatu and Switzerland. this has been a complete failure from ASIC and can never be repeated.”

Internal ASIC emails and letters released to The Australian in May under Freedom of Information laws revealed that one of ASIC’s highest ranking executive leaders branded a crucial section of the disastrous Nuix prospectus around internal financial risks control as “not controversial”.

The documents emerged as the troubled investigative software company Nuix issued its second earnings downgrade since February, junking revenue guidance only given to the market six weeks ago and seeing the shares tumble.

ASIC was warned in November 2020, according to internal documents, two weeks before the Nuix float, that the high-profile tech stock could find it difficult to hit its prospectus forecasts for revenue in fiscal 2021 because of a mass selldown in shares by senior Nuix staff.

There were also ominous warnings that the backers of Nuix’s $1.8bn float, including its directors and joint lead managers, could cash in their options and walk away without any recourse from shareholders if fraud was detected.

ASIC documents showed correspondence in November raised major concerns. Aperion Law director Mark Allen first contacted the corporate regulator on November 23 and followed up on November 25 with correspondence to the ASX, ASIC, and individual ASIC commissioners on their personal emails, making a number of serious allegations around the $1.8bn Nuix prospectus.

Mr Allen said he had been instructed by his client, who wished to remain anonymous, to bring to the regulator’s attention matters relating to the disclosures made by the promoters in the Nuix prospectus, which included its directors, members of the Nuix due diligence committee and the joint lead managers for the float.

However, ASIC investigators and legal officers hoped to give the lengthy and detailed complaint about the Nuix prospectus a cursory view and then move on.

“As predicted, a complaint in relation to Nuix. Let’s digest quickly and see if there is any substance,” read one email between senior ASIC legal staff and ASIC senior executive leader, corporations, Claire LaBouchardiere.

Mr Allen on behalf of his client also warned ASIC commissioners including ASIC deputy chair Karen Chester, the Nuix prospectus demanded extra scrutiny despite the agency’s limited resources, due to the highly-sensitive nature of Nuix’s clients that include the Australian government, other departments and overseas intelligence services.

ASIC also received an initial complaint about the forensics and investigative software company as far back as February 2020 – 10 months before its $1.8 billion float – with an anonymous complainant telling ASIC in an online form that “someone is breaching the law”.