ASX shareholder looks to sue directors, officers over CHESS

One of the ASX's shareholders is using a type of claim permitted under the Corporations Act to sue the market operator's former directors and officers on behalf of the ASX itself.

The ASX told the market Rosherville has proposed to bring an action in the Federal Court against the former directors and officers in relation to the CHESS project.

"The proposed application is for leave to commence a Statutory Derivative Action under ss 236 and 237 of the Corporations Act 2001 (Cth) against certain former officers and directors of ASX, whereby Rosherville would commence proceedings on behalf of ASX," it said.

Rosherville alleges the identified former officers and directors breached their directors' duties in connection to the CHESS project. There are no allegations against ASX itself.

A Statutory Derivative Action is a legal process that allows a shareholder or officer to bring a lawsuit on behalf of a company to seek a remedy for a wrong done to the company itself.

The market announcement did not name which directors or officers Rosherville intends to bring the action against.

The CHESS project has been the subject of regulatory action for some time. In June ASX admitted it misled and exposed market participants to financial risk related to the delivery of the CHESS replacement project in early 2022, despite realising the delay would occur as early as 21 December 2021. This resulted in ASX paying a $23 million fine.

According to ASX's announcement in February 2022, the project was "progressing well" to go live on the scheduled date of April 2023. However, a month later the ASX U-turned from the initial announcement, disclosing there was a strong likelihood the project would be delayed.

In November the same year, ASX paused the project and derecognised approximately $245-$255 million of its own project costs. Further, the project was internally classified "red", indicating significant unresolved issues or risks.

A year later, ASX announced a new CHESS replacement solution would be delivered in two releases, with clearing services in Release 1 and settlement and subregister services in Release 2. Release 1 went live on 20 April 2026.

ASIC commenced civil penalty proceedings in the Federal Court against ASX in August 2024, alleging it made the admitted misleading statements.

The exchange also came under immense scrutiny following several technical issues last year affecting its clearing and settling system.

It was advised to have "considerable work to do" by the Reserve Bank of Australia to meet the central bank's expectations for an operator of critical market infrastructure.

To rectify the underlying issues, including governance and listing requirements, the Advisory Group on Corporate Governance was formed to replace the ASX Corporate Governance Council in October.

The ongoing issues also saw former ASX chief executive Helen Lofthouse announce her departure back in February.

Lofthouse had been with the ASX for 11 years and became chief executive in August 2022. Previously, she was group executive for markets.

Over her time in the top job, she faced immense pressure, including from ASIC and the Reserve Bank of Australia, over lengthy delays to the new CHESS solution.

One of Lofthouse's first calls as chief executive was to dump the initial CHESS replacement project and start over.