The Australian Securities and Investments Commission (ASIC) has filed a lawsuit against the country’s foremost stock exchange. In the filing, the ASIC alleged that the Australian Securities Exchange (ASX) made a misleading statement about plans on how to replace its old systems with blockchain technology.
The ASIC tagged the statement as misleading and deceptive owing to how the project has failed to materialize despite how the ASX spent huge funds on it. On Wednesday, the ASIC revealed that the statement of the ASX disclosing that its Clearing House Electronic Subregister System (CHESS) trading platform would go live in April 2023 was false.
During that period, the Australian Securities Exchange, according to the regulator, claimed that the project was “progressing well”. Despite making such a claim in early February 2022, the ASIC established that the project remained behind track then.
Consequently, the regulator argued that the ASX has no reasonable basis to promise that the project would be ready in a few months despite knowing well that the progress has stalled for a while.
Furthermore, the ASIC Chair, Joe Longo added that as of February 10, 2022, the blockchain project wasn’t in the state the ASX claimed it was.
More so, the Chair went on to attribute the demise of the project to the collective failure of the ASX Board and other senior executives. Meanwhile, the ASIC announced that it had not determined the penalty it would place on the ASX.
ASX Promises To Work With The ASIC
On the flip side, Australian Securities Exchange has promised to remain in compliance with the proceedings of the investigation. According to the CEO and Managing Director of ASX, Helen Lofthouse, the firm understands the importance and implications of the legal proceedings.
However, the CEO promised that the firm would fully cooperate with the inquiry. Also, Lofthouse added that the ASX is reviewing and considering all the allegations from the ASIC.
It is worth mentioning that ASX first made a move to replace CHESS with blockchain technology in early 2016. The CHESS is a computer system that has been in use since the mid-1990s that helps manage the settlement of share transactions and record shareholdings.
However, after five (5) years of developing the blockchain project and spending more than $170 million, the Australian Securities Exchange abandoned the initiative. The firm took the decision after consulting Accenture which discovered some deficiencies in the project that made ASX pause the development.
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