ASIC Sues ASX Over Misleading Information On Troubled Software Upgrade
![Stock Market](https://d.ibtimes.com.au/en/full/1856878/stock-market.jpg?w=736&f=07d0ce978faae59ca38ab86841af9d4b)
Australia's corporate watchdog Australian Securities and Investments Commission (ASIC) is suing the country's main stock exchange, ASX, alleging that it misled the public about the upgrade of the post-trading clearing house platform, known as CHESS.
In 2015, the ASX planned to digitalize the trading system by switching to a blockchain-based clearing and settlement platform. ASX updated the public in February 2022 that the Clearing House Electronic Sub-register System (CHESS) project was "on track for go-live" in April 2023 and was "progressing well," despite warnings from software vendor about delays in the project.
ASIC said the ASX statements were misleading and alleged that the exchange undermined financial market integrity and investor confidence, ABC News reported.
"ASX over a long period of time were reassuring both us and the market that the CHESS replacement program was going smoothly, was progressing," ASIC chairman Joe Longo said in a statement. "And those assurances were given right up until February 2022. And frankly, I am very disappointed, and the market is very disappointed that the CHESS replacement program wasn't going as well as ASX was saying."
Longo noted that the ASX should be held responsible for misleading the public adding that the lawsuit, which seeks unspecified fines, is necessary to give a message on the seriousness of alleged misconduct and corporate governance failure.
"So this case is all about holding ASX itself to account, for its announcements to the market and for its corporate governance," he said.
According to a Reuters report, the software vendor, Digital Asset (DA), had warned ASX that "there was a risk of continued delays to the delivery of code ... and that this would put additional pressure on future milestones." By 2021, ASX had categorized the project status as "red."
ASIC stated that a week before the February update, ASX's audit and risk committee was informed about the project's "red" status. Despite the warning, ASX updated the public in February 2022 that the project was progressing well and would go live the next April. After serious lapses, the project was finally shelved in November 2022.
ASX, which is responsible for nearly AU$5 billion trades in a day, broke the law when it stated the software upgrade was progressing well, ASIC pointed out.
ASX is now collaborating with India's Tata Consultancy Services to complete the software upgrade by 2029.
ASX managing director and CEO Helen Lofthouse said the exchange is reviewing the allegations of ASIC and recognized the significance and serious nature of these proceedings.
© Copyright 2024 IBTimes AU. All rights reserved.