Australia’s Securities and Investments Commission (ASIC) has taken legal action against the Australia Securities Exchange (ASX) Ltd., alleging that the exchange made false statements regarding its blockchain trade settlement project. ASIC claims that the ASX misled the public by stating that the project was progressing and on track for a 2023 launch, when in reality, it was facing challenges and was ultimately canceled.
The ASX’s blockchain initiative was intended to replace the Clearing House Electronic Subregister System (CHESS). However, ASIC revealed that the project was halted in November 2022 due to design challenges. This delay and eventual cancellation of the project led to substantial financial losses for the ASX and its market participants. ASIC Chair Joe Longo emphasized that the failure of the project undermined market integrity and reflected poorly on the ASX board and senior executives.
Importance of Accurate Information
Longo highlighted the importance of providing accurate information to market participants and the wider impact of ASX’s misstatements. He stated that companies and market participants rely on the ASX’s disclosures to make informed decisions and investments. When the ASX fails to deliver on its promises, it has far-reaching consequences across the market.
ASIC Actions and ASX Response
ASIC disclosed that ASX had already paid penalties amounting to over $660 million in March for non-compliance with market integrity rules. In response to the lawsuit, ASX CEO Helen Lofthouse acknowledged the seriousness of the allegations and stated that the company was reviewing ASIC’s claims. She reiterated ASX’s commitment to supporting and delivering for its customers, emphasizing the progress made by the organization in the past two years.
ASIC is seeking declarations, pecuniary penalties, an adverse publicity order, and costs against ASX as part of the lawsuit. The legal action taken by ASIC underscores the regulatory scrutiny faced by financial institutions and the consequences of misleading statements on market integrity. This lawsuit serves as a reminder to companies operating in the financial markets about the importance of transparency and accountability in their operations.
