Leading eMoney, payments and identity technology company, iSignthis Ltd (ASX: ISX) has commenced legal proceedings against the Australian share market operator, ASX Limited, in the Federal Court of Australia to challenge the decisions made by the ASX to suspend, and not reinstate, the ISX’s shares for quotation on the exchange.
Dispute of ISX and ASX
The dialogue between ISX and ASX has been going on for over nine weeks now. It all started with ASX query letter dated 12 September 2019 wherein ASX questioned about the volume traded and the change in the prices of ISX shares that occurred in the period from 11 September 2019 through to Thursday, 12 September 2019.
In its response to ASX letter, ISX talked about the report authored by James Samson, CFA & Dean Paatsch on the 10 September 2019 which raised “Questions for ISX regarding ownership and related party transactions”. ISX refuted the allegations saying that the ownership of iSignthis Ltd is “opaque”, with full disclosure of director interest and substantial holder interests having been made to the ASX.
Later on 10 October 2019, after another Price query letter, ASX suspended ISX’s securities in consultation with the Australian Securities and Investments Commission. It is to be noted that, before the suspension of ISX shares, the shares had witnessed an increase of 262% in the previous six months.
Since the suspension, ISX has answered diverse questions from the ASX such as:
- Why a bundled service is billed on a bundled basis
- Why it selected a particular European bank to hold client funds
- How much did a change to Apple’s privacy settings last year affect revenue
- What website names are used by a customer
- How its revenue is broken down by country
- Whether or not it offers services for initial coin offerings
In one of the latest ASX query letter, ASX demanded an explanation from ISX regarding why ISX bills ‘Identity as a service KYC’ and ‘Payment Gateway’ together as a bundled service, and why it is unable to provide the revenue generated from these two services separately.
In its response, ISX informed that bills “Identity as a service KYC” and “Payment Gateway” together as a bundled service because these services are interlinked which means that the Paydentity service requires the “Payment Gateway” to process the payment in order to verify the identity of the payer.
ISX Tier 2 payments network as at mid-2018 (Source: Company Reports)
In other question, ASX demanded an explanation on why ISX did not release the key terms for the Corp Destination agreement; the second FCorp agreement; the Immo agreement; the agreement between Nona and Authenticate BV which generated €252,500 of revenue in April 2018.
ISX has provided response to each question in its response.
Despite answering the questions, ASX has not yet removed ISX’s securities from the suspension stage. This is why, ISX has now taken the matter to court.
The major concern of ISX is that its investors are being denied the opportunity to trade their shares as ASX has not yet lifted the suspension of trading in the company’s shares.
Company’s Chairman, Tim Hart commented:
“We are acting in the interest of our shareholders, as they have been denied the basic right to trade our shares for too long”
ISX is of the view that the interactions with the ASX during the last nine weeks raises issue of procedural fairness and good faith, as well as a substantive question about the actual reason for the suspension.
The Company’s Chief Executive Officer, John Karantzis has made following comments:
“We have answered scores of questions and provided more than 2000 pages of confidential documents dating back almost three years”
“We have been patient and acted in good faith, but the Company’s shares have been suspended for nine weeks”
While ISX is arguing that it has answered to ASX questions multiple times, ASX Limited is not satisfied with the ISX answers. From ASX review to date, it appears to ASX that
- some items of information have not been provided;
- some information that has been provided is not complete; and
- some information that has been provided requires clarification or the provision of further information.
Swift Operational Update
On 6 December 2019, ISX announced that it is no longer in a position to consistently operate SWIFT transfers originating from the country owing to several issues faced by national banks, including a number of anti-money laundering (AML) failures.
Previously, ISX has relied upon a number of Australian banking partners to assist it with its SWIFT transaction with several international jurisdictions under a Tier 2 arrangement and has been a client of various Australian banks and has relied upon those banks and their SWIFT systems in the past.
The company is currently in the process of setting up its own Tier 1 arrangements through the European TARGET2 framework that will allow it to incorporate its Paydentity™ platform into incoming and outbound transactions and ensure that it is independent of 3rd party banks for SWIFT transfers.
It is to be noted that Paydentity™ is an advanced anti- crime and AML system which can screen outbound and inbound SWIFT transactions in real time against sanction, politically exposed person lists, and court databases, ensuring the authenticity of operations implemented by ISXPay®.
Along with Paydentity™’s KYC’s Customer function, the company has the ability to determine whether the originator of a transaction is the person(s) authorised to operate the sending account and can verify the character and monitor the sender. When utilising its own Tier 1 infrastructure, the company is able to identify real-time based Suspicious Matter Reports to financial intelligence units.
As ISX has temporarily suspended outbound SWIFT (but not inbound), it is expected that there will be a softening in the growth of GPTV until end of February 2020, with the FY2019 impact to be factored into the revised earnings guidance to be issued next week. ISX has informed that it will still be able to receive monies from outside the EEA/EU and distribute within the EEA/EU via its own Tier 1 SEPA connectivity.
It is anticipated that the company’s own independent SWIFT Tier 1 facilities will be operational by end-February to mid-March 2020, utilising the EU’s TARGET2 central-bank to credit institution (bank) infrastructure. As such, the temporary outage and transition to own facilities will ensure that the company does not suffer issues from other banks.
Currently in the suspension stage, ISX stock last traded on 1 October 2019 at a price of $1.070
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