ASX faces penalty over misleading CHESS update

Australia’s securities regulator has confirmed that ASX Ltd. admitted a market announcement made on 10 February 2022 about its CHESS replacement project was misleading. The announcement, which stated that the project was “progressing well,” has been found not to accurately reflect the status of the initiative.

The Australian Securities and Investments Commission (ASIC) has said this misleading statement exposed market participants to the risk of financial harm. The case centres on the quality and reliability of information provided by a key market infrastructure operator to listed companies, investors and other stakeholders.

ASIC and ASX have agreed to seek Federal Court approval for a settlement that includes a A$20.5 million civil penalty. The settlement also provides for ASX to contribute A$3 million toward ASIC’s legal costs, bringing the total financial impact of the agreement to A$23.5 million.

The resolution will be presented to the Federal Court for consideration. The penalty and cost contribution are contingent on the court’s approval, which will determine whether the agreed terms are appropriate in light of the admitted misconduct.

ASX’s chair has issued an apology to the market, acknowledging that the exchange “fell short” in its disclosure about the CHESS replacement project. The chair also recognised the impact of the misleading statement on trust and confidence in the market operator.

The case highlights the regulatory focus on accurate and timely disclosure by critical market infrastructure providers. ASIC’s assessment that the announcement exposed participants to potential financial harm underscores the importance of reliable project updates where system changes can affect trading, clearing or settlement.

The settlement negotiations and admission of misleading conduct reinforce expectations that market announcements must present an accurate picture of material projects. For ASX, the matter adds a compliance and governance dimension to its ongoing work on the CHESS replacement initiative.

More broadly, the enforcement outcome signals to listed entities and market operators that optimistic or incomplete characterisations of major operational projects may attract regulatory scrutiny, particularly where they could influence investment or operational decisions by market participants.