Background
ASX Limited spent years developing a replacement for CHESS (Clearing House Subregister System), Australia’s critical clearing and settlement infrastructure for financial market transactions. Beginning in 2016, ASX engaged Digital Asset Holdings to build a replacement system using distributed ledger technology, with an initially planned Go-Live date of April 2021. In October 2020, ASX announced a revised plan with a Go-Live target of April 2023 and published detailed milestones.
By mid-2021, Digital Asset experienced delivery delays. By December 2021, the project status had been downgraded to “Red” (meaning “heightened awareness or action required” and “material threat to project outcomes”). Despite this red status remaining unknown to the public, ASX on 10 February 2022 announced that the CHESS Replacement Project was “progressing well, with the fully integrated industry test environment open and operating successfully.”
In reality, as at 10 February 2022, the project was significantly off track. ITE1 (Industry Test Environment 1) had been opened with reduced functionality and performance. ASX planned to open ITE2 and ITE1 Accreditation—both critical path milestones—with descoped capabilities. The system required “shifting right” (delays in delivering functionality), leaving insufficient time to complete all work before the April 2023 target.
The Court’s Holding
Justice Markovic accepted an agreed statement of facts and admissions from ASIC and ASX, finding that ASX’s “progressing well” representation on 10 February 2022 contravened sections 12DA and 12DB of the Australian Securities and Investments Commission Act 2001 (Cth). The representation was misleading because it conveyed an opinion about the project’s progress that was not reasonable given the true facts: the project was not on its critical path, had red status, and multiple milestones would be delivered with reduced scope and performance compared to what was publicly promised.
The court declared two separate contraventions under section 12DB(1): one for falsely representing the services were of a particular standard, quality, value or grade (section 12DB(1)(a)), and another for misrepresenting the performance characteristics and benefits of the services (section 12DB(1)(e)). The court also found a contravention of section 12DA (general prohibition on misleading or deceptive conduct in relation to financial services).
Key Takeaways
- An opinion representation can be misleading under the ASIC Act if the opinion held is not reasonable, even if the underlying facts are not explicitly false.
- ASX’s statements about the CHESS project “remaining on track” were misleading when the project had been internally downgraded to red status and key deliverables were being descoped.
- Disclosure obligations apply with particular force to critical financial infrastructure; market participants and software vendors had invested significantly based on the published plan and ASX’s public assurances.
- A major Australian financial institution was held liable for $20.5 million in penalties plus $3 million in costs for misleading market communications, reflecting the severity of disclosure breaches affecting market infrastructure.
Why It Matters
This enforcement action demonstrates ASIC’s commitment to holding even large, systemically important institutions accountable for misleading disclosures. ASX’s conduct affected not just ASX as a company but the broader Australian financial market: CHESS processes trillions of dollars in daily transactions, and participants (software vendors, brokers, market operators) had made substantial commitments based on ASX’s published timeline and assurances. The judgment reinforces that entities cannot downgrade project status internally while maintaining optimistic public statements without breaching the ASIC Act.
The case also illustrates the scope of section 12DB(1)(e)—liability for misrepresenting performance characteristics or benefits extends beyond literal falsehoods to unreasonably held opinions about how services are progressing. In March 2022, ASX announced delays and ultimately paused the project, writing down $245–255 million in capitalised costs. The judgment makes clear that earlier, more candid disclosure of the project’s true status would have been legally required.