MIU - Issue 166 - April 2025
RBA and ASIC act on deep concerns with ASX
In a joint letter to ASX, the Reserve Bank of Australia (RBA) and ASIC (the regulators) have expressed their deep concerns about the potential for operational incidents, such as the CHESS batch settlement failure, to affect the ability of the CHESS system to reliably service the Australian equities market until CHESS is replaced. The regulators also highlighted their concern about the speed and nature of ASX’s remediation actions following the initial incident.
In response, the RBA has taken the unprecedented step of reassessing the compliance of ASX Clear Pty Limited and ASX Settlement Pty Ltd with the RBA’s Financial Stability Standards outside the usual annual cycle. The RBA has downgraded its assessment of these entities’ compliance with the “Operational Risk” standard from partly observed to not observed. A rating of not observed is made when the RBA has identified serious issues of concern that warrant immediate action.
In addition, ASIC has directed ASX, under section 823BB(4) of the Corporations Act 2001, to engage an expert approved by ASIC to undertake a technical review of CHESS. This review and any remediation will provide greater confidence to regulators, and the public, in the stability and operational resilience of the current CHESS platform.
Update on ASIC’s regulatory roadmap for public and private capital markets
In February 2025, ASIC released a discussion paper canvassing issues key to the ongoing and future success of Australia’s capital markets. The paper sought feedback on ASIC’s role in balancing the dual goals of ensuring Australia’s public and private markets are open, accessible, attractive and support economic growth, while protecting against risks.
The submission period for feedback in response to the paper’s key questions closed on 28 April 2025 and we are reviewing the feedback we received.
Our thematic surveillance of private capital funds is now underway. These surveillances cover retail and wholesale funds and are examining a range of issues including governance; valuation practices; conflicts of interest; staff and insider trading; the protection of confidential information; and the fair treatment of investors. For private credit funds, there is also a focus on credit risk and liquidity management.
We expect to release an update to our paper and surveillance work later in 2025 that will outline our responses to key feedback and ideas and how we will use these inputs to inform our priorities and future work program.
The responses to the discussion paper and our other related work will help guide ASIC’s work in the next 12 months, including whether ASIC needs to consider any regulatory interventions such as updated guidance, focus areas for ongoing surveillance activities or action against contraventions of the law.
In addition to releasing an update later in year, in the coming months we will be hosting industry events to outline and discuss key feedback we have received.
Review your artificial intelligence governance and risk management arrangements
We urge market participants to ensure their governance practices and risk management systems keep pace with their accelerating adoption of artificial intelligence (AI).
In our recent review of the current and planned use of AI by 40 market intermediaries, we found that AI adoption is growing and many market intermediaries lacked AI-specific documented governance arrangements and as such, there may be gaps in AI risk assessment.
The responses revealed 70% of market intermediaries currently use AI, and 71% expecting to expand their use in the next 12 months. AI is primarily being used by these market intermediaries for information generation, with use cases expected to increase over the next 12 months.
These review findings mirror the same risks identified in ASIC’s October 2024 review of the use and adoption of AI by 23 licensees (REP 798) which found there was potential for governance to lag AI adoption, despite current AI use being relatively cautious.
ASIC supports innovation in the financial system that is balanced with appropriate consumer protections and market integrity safeguards. Despite AI’s popularity, key challenges noted by industry include data privacy and security, skills and knowledge gaps, and data quality issues.
As ASIC Chair Joe Longo recently said, ‘All participants in the financial system have a duty to balance innovation with the responsible, safe, and ethical use of emerging technologies – and existing obligations around good governance and the provision of financial services don’t change with new technology.’
Please refer to Report 798 Beware the gap: Governance arrangements in the face of AI innovation (REP 798) for guidance on complying with existing licensee obligations when using AI.
Understanding and responding to AI use across regulated entities is a key priority for ASIC. We will continue to monitor the use of AI by market intermediaries and assess the adequacy of their governance and risk management arrangements.
Recent ASIC enforcement action
Our 2025 enforcement priorities send a clear compliance message to the entities we regulate. Governance and directors’ duties failures are also one of ASIC’s enduring priorities
ASIC will continue to take action to hold directors and officers of publicly listed companies accountable for their misconduct and ensure confidence in our markets.
ASIC sues WA gold mining company Wiluna Mining Corporation for continuous disclosure and directors’ duties breaches
ASIC commenced civil penalty proceedings in the Federal Court against Wiluna Mining Corporation, its former chair Milan Jerkovic and former commercial officer James Malone.
ASIC alleges that Wiluna breached continuous disclosure obligations and Mr Jerkovic, amongst other matters, his director duties, by failing to accurately announce the amount raised by Wiluna via a rights issue to the 91AV Exchange (ASX). ASIC also alleges Mr Malone failed to take reasonable steps to ensure that statements to the ASX were not false and misleading.