The Australian Securities Exchange (ASX) has announced that its CHESS replacement program is being investigated by the corporate regulator for potential contraventions of the ASIC Act 2001 and Corporations Act 2001, including the possible submission of false or misleading documents and misleading or deceptive conduct by directors.
In an announcement released on the exchange this morning, the ASX confirmed that ASIC will investigate whether any part of the ASX Group (ASX Limited, ASX Clear Pty Ltd, or ASX Settlement Pty Ltd) as well as their directors and officers, may have contravened obligations under section 180, 674, 674A, 1014H and 1308 of the Corporations Act 2001 and Sections 12 DA and 12 DB of the ASIC Act 2001.
The regulator will investigate not only the oversight of the CHESS replacement program, but also statements and disclosures made by or on behalf of ASX as to the status of the program.
Section 180 of the Corporations Act 2021 covers the responsibility of directors and officers to exercise care and diligence in their decision-making and make appropriate business judgements, including obligations to make judgements in good faith, have no material personal interest these decisions, and ensure these decisions are in the best interests of the corporation.
Sections 674 and 674a cover matters relating to continuous disclosure, requiring publicly listed entities to inform stakeholders of relevant information in respect of listing rules and the expectations of a listed company.
Perhaps the most glaring of potential Corporations Act breaches being investigated is Section 1308, which relates to the submission of materially false or misleading documents to ASIC.
Of the possible ASIC Act breaches, Section 12 DA includes conduct that may be misleading or deceptive (particularly with regard to Corporations Act 2001 subsections 674 and 674A), while 12 DB relates to false or misleading representations, notably in regard to standard, quality, price or need for services delivered by an entity.
The investigation will cover the period between 28 October 2020 to 28 March 2022.
“ASX takes its obligations very seriously and will cooperate fully with ASIC,” the announcement said.
Last month, ASIC called for the ASX to submit additional proof that it is meeting the recommendations of a recent external review into the failings of the CHESS Replacement Project.
Commenced in 2018, the original CHESS Replacement Project was set to deliver a complete overhaul of the Exchange’s now 25-year-old clearing and settlements system, promising – through a blockchain-backed technology solution – improvements in overall availability, reliability and performance.
Following an independent audit late last year, which identified deficiencies in the proposed replacement platform’s design, architecture, technical capabilities and governance processes, the ASX opted to retool the program.
The replacement program now facing an up to two-year delay until a new, workable solution can be found.