ISX Accuses ASX of Blocking Independent Expert Review

ASX told Finance Magnates it is seeking clarification of the scope before publishing.

As part of the ongoing legal proceedings between the Australian Securities Exchange (ASX) and iSignthis (ISX), the latter has released the findings from an Independent Expert review requested by the exchange.

The Independent Expert review was conducted by two partners of Clayton Utz. According to a document seen by Finance Magnates, the review found that whilst iSignthis is “largely compliant with the Regulatory Recommendations” the review did identify a number of areas where the company could improve in regards to Listing Rule 3.1, which covers Continuous Disclosures.

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Following the completion of the report, the Managing Director of iSignthis, John Karantzis, has accused the ASX of blocking the release of the review on Friday. 

However, a spokesman from the ASX told Finance Magnates: “ASX has reviewed the independent expert’s report and has asked some questions about the report’s scope. Once resolved, ASX will require ISX to release the complete report so the full findings are public.”

Background on Independent Expert review requested by ASX

In particular, in an email dated on the 1st of May 2020, sent by ASX to iSignthis, the exchange directed the payments identity company to engage an independent expert that was acceptable to the country’s primary securities exchange.

The Independent Expert review was to take a look at ISX’s policies and processes to comply with Listing 3.1, the exchange highlighted that the review should assess each contract that the company entered into since the 1st of January 2018, other than the Key Contracts, to determine whether or not a reasonable person would have expected information about the contract to affect the price of the value of ISX’s shares. The exchange then wanted these findings to be released to the market.

“Based on our review in accordance with the Agreed Scope, we did not identify any contract entered into by ISX with customers since 1 January 2018 that has not been disclosed and that, in our opinion, was of such a nature that a reasonable person would have expected information about the contract to affect the price or value of ISX’s shares,” Clayton Utz said in its review.

The review from Clayton Utz then went on to say: “While our review of the Policy found that it is largely compliant with the Regulatory Recommendations (as defined below) and best practice of ASX 300 companies (based on our review of the continuous disclosure policies of five ASX 300 companies, we did identify certain areas in which the Policy does not fully comply with one or more of the Regulatory Recommendations or is not consistent with common practice of ASX 300 companies.”

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Recommendations from Clayton Utz

In the review, Clayton Utz recommended that ISX consider formalising a continuous disclosure committee which meets to discuss matters for potential disclosure before those matters are then referred to the Board for a decision. 

The company also proposed that ISX continue to access further external advice more frequently to ensure greater observance of ASX’s guidelines on key disclosure matters and that ISX Board and members of senior management continue to access further external advice in relation to its continuous disclosure obligations, among other recommendations.

In response to the recommendations, John Karantzis, Managing Director, iSignthis Ltd, said in the letter: “As with any policy or procedure, there is always room to improve, and the Company welcomes the constructive review and recommendations from Clayton Utz.

“The Company has accepted the umpire’s decision. Where the Independent Expert has found that there have been shortfalls, we will improve. The Independent Expert’s recommendations will be implemented in the Company’s Continuous Disclosure Policy (per the ASX announcement today).”

ISX accusations

Furthermore, in its letter to shareholders, Karantzis said that the Australian exchange’s response to the review has been “unexpected”, alleging that the ASX blocked the release of the review on Friday, as well as “engaged in an unseemly squabble with the Independent Expert.”

John Karantzis iSignthis ISX
John Karantzis – CEO of iSignthis

“For the ASX to place pressure on the Independent Expert – one of its own choosing – simply because it does not like its findings is an unprecedented and extraordinary act from the self-declared ‘heart’ of the Australian financial markets,” Karantzis outlined in the letter.

“As we have said for many months, the ASX has been unable to separate its role as market operator, from that of being the defendant in $50m plus damages claim brought by ISX.”

As mentioned above, the ASX said it is asking questions regarding the review’s scope and once resolved, the exchange will allow ISX to publish the report. Finance Magnates has also reached out to Clayton Utz for further clarification, but as of the time of publishing, we have not yet received a response.

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