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Payment identity verifier iSignthis (ASX: ISX) could find itself in hot water if it fails to meet demands from the ASX, with the market operator unhappy with explanations of processing suspensions across card networks such as Visa.
The ASX claims ISX has given "three unsatisfactory responses" to a query letter dated 7 May, making it allegedly in breach of listing rule 18.7:
"An entity must give ASX any information, document or explanation that ASX asks for to enable it to be satisfied that the entity is, and has been, complying with the listing rules...The entity must do so within the time specified by ASX..."
The market operator claims unless iSignthis remedies this alleged breach, it will act as a "further impediment to the reinstatement of ISX's shares to quotation on ASX".
On repeated occasions the ASX has highlighted its powers to remove ISX from the official list under listing rule 17.12, and its power to censure the entity under listing rule 18.8A.
The company was first placed into voluntary suspension on 2 October 2019, and has been at the centre of an ongoing row with the ASX that included a failed legal attempt to block the publication of alleged breaches.
This year iSignthis CEO John Karantzis (pictured) also became interim CEO of rival share market the National Stock Exchange of Australia (NSX), with which iSignthis is trying to create an "Australian NASDAQ" boosted by same-day settlement trading.
Against the backdrop of this hostile relationship, the ASX's query letter sought clarifications on several issues, including the following statement to the market on 29 April:
"'Processing to merchants across the Visa network was also suspended for parts of March pending response to Visa re queries on ASX "investigation", concerns re "derogatory media" and the focus on high risk merchants."
On 14 May the ASX sent a letter to iSignthis describing its first response to the query letter as "unacceptable", as the company had refused to provide information on its discussions with Visa on the grounds the negotiation was "incomplete".
But the market operator claims the ISX cannot use this defence as the company's disclosures to date allegedly indicate the negotiation is not incomplete and has already happened.
"The Visa suspension is not confidential - it has been disclosed by ISX itself (although ISX has not given details of when the suspension started, what services were suspended, why the suspension was imposed or how long it will last). It has also been disclosed on Visa's global registry of service providers," the ASX said.
"Finally, in the circumstances of this matter, ASX considers that a reasonable person would expect ISX, as a payment services provider that has been suspended by one of the major global card systems possibly because of concerns related to money laundering, to make proper disclosure of the suspension and the circumstances surrounding it."
The ASX also asked ISX to update the activities report at the front of its Appendix 4C for the quarter ending 31 March 2020 to include the required description and explanation of the $144,000 of payments in item 6.1.
Karantzis hit back with ISX's second response, alleging the ASX's email was "not acceptable" and "either deliberately misrepresents the issues and circumstances outlined in my email or it exhibits a fundamental lack of comprehension".
"ISX made the point that the availability or use of any one card scheme is not material to the price or value of ISX's shares," he said.
"On that basis there is no issue under Listing Rule 3.1. ASX would not be issuing a query letter to Westpac, CBA, EML, Tyro or Afterpay if there were possible changes to the mix of cards used in their businesses; it likewise has no legitimate purpose in doing so for ISX."
He also alleged the ASX was outrageously abusing its powers in proposing to publicly release its money laundering concerns over iSignthis.
"You have not at any stage provided any evidence of that unfounded proposition - you have no such evidence," Karantzis said.
"ISX is not in any way involved in money laundering. Any such suggestion is a gross and actionable misrepresentation and ISX will not hesitate to take all steps to defend its reputation. I require that you immediately withdraw that imputation, apologise and undertake not to repeat or publish it.
"In light of all of the above, the reference to an "unwillingness to comply" with the Listing Rules is mischievous and self-serving. ISX has at all times been willing to comply with the Listing Rules and expects ASX to do likewise.
The market operator doubled down on its position in its response to ISX's second letter, claiming it was "not in a format suitable for release to the market".
"ASX does not accept the submission in ISX's Second Response that because, in ISX's view, ISX has not breached the listing rules, ISX does not have to respond to ASX's Query Letter under listing rule 18.7," the ASX said.
"With respect to the comments ISX has made in the Second Response about questions regarding possible money laundering-related issues, it was open to ISX to provide a proper response to the Query Letter explaining the circumstances of Visa's suspension of ISX's subsidiary, iSignthis eMoney Ltd, and, if the suspension had nothing to do with any money laundering-related issues, to explain that fact."
The ASX said it was giving the company "one last chance" to comply with its obligations, giving it a deadline for 9:30am AEST today.
The third response came through three minutes before the deadline, and the ASX claims it is clearly not a complaint response.
"It avoids answering a number of direct queries and gives incomplete or confusing responses to a number of others," the ASX said today in its release at 3:53pm AEST.
"It also does not supply a copy of all correspondence between ISX and Visa on relevant matters, as requested in question 5 of the Query Letter."
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