PenCom Suspends All Pension Fund Investments In Commercial Papers

The National Pension Commission (PenCom) has mandated that Licensed Pension Fund Administrators (LPFAs) and Custodian Funds halt all investments in commercial papers managed by non-banking capital market operators.

This directive was issued in a recent circular (Reference: PENCOM/TECH/ISD/2024/402) dated October 23, 2024, signed by A.M. Saleem, Head of PenCom’s Surveillance Department, and addressed to the Managing Directors (MD) and Chief Executive Officers (CEOs) of LPFAs.

The circular highlighted a notable increase in LPFA investments in commercial papers issued by limited liability companies, with capital market operators, rather than banks, serving as Issuing and Placing Agents (IPAs). However, PenCom expressed concerns regarding a regulatory gap, noting that the Securities and Exchange Commission (SEC), which oversees the capital market, has yet to establish specific guidelines for these non-bank commercial paper issuances.

“All LPFAs are directed to immediately suspend further investment in commercial papers where capital market operators (non-banks) are engaged as IPAs,” the circular emphasised. This suspension, PenCom stated, will remain in effect until SEC develops and enforces comprehensive regulatory standards for non-bank managed commercial papers.

PenCom’s directive highlights the agency’s focus on safeguarding pension funds through stricter regulatory compliance, urging LPFAs and Custodian Funds to adhere closely to this directive to ensure all pension fund investments are adequately regulated.

The move highlights PenCom’s commitment to reinforcing regulatory oversight in pension fund management, ensuring transparency and security in the investment of pension assets.