ASIC hits ASX with $150m penalty after finding inadequate investment
The regulator’s interim report into the ASX has found the market operator prioritised paying out profits to investors rather than investing in its future. That has created ‘organisational inertia and a lack of aspiration’.
The Australian Securities Exchange prioritised profits at the expense of its platforms, according to a review from the corporate regulator which concluded in a vote of no-confidence in the market operator.
The corporate regulator on Monday penalised the ASX with a $150m capital charge. The Australian Securities & Investments Commission has also ordered the ASX shake-up the boards overseeing its critical market services, flagging further supervision and possible intervention to come.
The interim report into the ASX, to be finalised in March 2026, warns the market operator has failed to balance the need to deliver investment returns with the an obligation to reinvest in technology, processes and strategy to future-proof the business.
Instead, a panel of regulators and experts has concluded the ASX allowed shareholder interests “to compromise the outcomes needed for stable, secure and resilient market infrastructure”.
The ASX has paid out 95 per cent of statutory profits over the past five years, according to the review, which concluded shareholders expected handsome returns in perpetuity.
ASIC chairman Joe Longo blamed the ASX’s board for allowing it to be captured by shareholder interests who trumped the need to reinvest in the backbone of the sharemarket.
Mr Longo, who has frequently criticised the ASX over its litany of technology and systems failures, said the market operator had paid out “too much of their operating profit”.
“We will hold them accountable if they don’t meet these commitments,” he said.
While dominated by small retail shareholders, as a result of the ASX’s demutualisation, two key superannuation funds, AustralianSuper and UniSuper, hold the most sway on the register. An AustralianSuper spokesman declined to comment.
But UniSuper chief investment officer John Pearce said he hoped the ASX had turned a corner. “It’s our hope and expectation that this ruling finally puts a line in the sand and we can move forward from here,” he said. “At current levels we expect the stock should find some valuation support.”
Shares in the ASX have cratered from their highs of nearly $93 in late 2021. On Monday, they dived 5.7 per cent to $53.66.
The panel undertaking the review includes former Reserve Bank deputy governor Guy Debelle, AGL audit and risk chair Christine Holman, and career banking director Rob Whitfield.
The panel found the ASX, thanks to its monopoly over the Australian sharemarket, has faced little competitive pressure resulting in “organisational inertia and a lack of aspiration”.
Past ASX boards and executives have focused on a narrow process-oriented way of operating, which was not outcomes focused. The review also found the ASX had failed to investigate and remediate its past technology failures. Instead, it turned to “tactical and reactive solutions”.
ASIC intends to force change on the ASX boards that oversee its critical market functions. This will mean ASX Clear, ASX Clear (Futures), and Austraclear are restructured to “robustly deliver on their responsibilities”. The ASX clearing and settlement boards will also be required to ensure each sitting director is independent.
ASIC said the independent directors must “have the independence of mind, skillset, and calibre”.
ASX will also be tasked with ensuring dedicated resources, greater transparency and control of finances for the clearing and settlement facilities. ASX must deliver a “strategic reset” of its Accelerate program, by 1 July 2026, or fail. Accelerate is aimed at delivering improvements across operational risk, business and technology resilience, data management, as well as culture and capabilities.
The review found Accelerate “was not sufficiently aspirational and had fundamental problems”. “The program suffered from flawed foundational assumptions, inconsistencies, failure to recognise key interdependencies within the program, lack of resources and capability, and misaligned objectives,” the report found.
“There are also additional initiatives missing from the program that the panel believes are fundamental for a transformation of this scale.”
The expert panel has largely completed its review, conducting more than 140 interviews with past and current staff and directors as well as regulators and overseas operators.
A $150m capital charge will ensure the ASX reflects “its elevated risk profile” and will remain in place until the ASX “achieves the milestones identified in the reset Accelerate Program, and ASIC approves the staged reduction or release of the capital charge”.
The ASX plans to raise the cash through retaining earnings alongside a discounted dividend reinvestment scheme.
But the capital charge will also limit executive bonuses, with ASIC commissioner Simone Constant noting the corporate regulator would now work through with the ASX how it should approach pay.
However, ASIC also floated the prospect of the ASX being undercapitalised, warning the market operator had four years to demonstrate “sufficient net tangible assets to meet its financial resource requirements”.
ASX must cut its dividend from 80-90 per cent to 75-85 per cent of profits, and meet the lower end of that range for at least the next three dividends. The market operator also warned its expenses would lift $25m-$35m; capital expenditure will also rise to $170m-$180m in 2026.
The ASX aimed to reduce this to $160m-$180m in 2027 “as our investments deliver a modern, sustainable and resilient technology environment”.
Chief executive Helen Lofthouse said the ASIC report was “tough” and placed the market operator “under a critical lens”.
“We are aligned with the report on the need to transform and that has been the driving force behind our strategy, including our significant investment in technology modernisation. This reset gives us further impetus to bring about deep and lasting change,” she said.
Ms Lofthouse said the latest work for the ASX piled on to its existing projects, including an attempt to replace its ageing clearing and settlement system CHESS.
“We really are right at the edge of capacity for the market as well,” she said.
“Our customers are having to work hard to absorb all this change.”
ASX chair David Clarke said the market operator had to “strengthen leadership”.
“We are committed to doing this at all levels of the organisation to deliver these outcomes,” he said.
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Originally published as ASIC hits ASX with $150m penalty after finding inadequate investment
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