The National Pension Commission (PenCom) lifts suspension on recent a circular of 23nd October 2024 directing all Licensed Pension Fund Administrators (LPFAs) to immediately suspend further investment in commercial papers where capital market operators (non-banks) are engaged as Issuing and Paying Agents (IPAs) due to the absence of rules governing the issuance.
PenCom’ volte-face stems from SEC new approach to address its concern; SEC has developed draft rules and an amendment to rule 8 (Exemptions) to regulate the issuance of Commercial Papers by its regulated entities. As it now stands, SEC has has started the process to bring IPAs within regulatory boundaries in their role of nonbank IPAs in commercial bank transactions.
Consequently, to facilitate capital raising and ensure continued market stability, PenCom has lifted the restriction on LPFAs investing in commercial papers where capital market operators act as IPAs.
Nonetheless, LPFAs must ensure that appropriate legal and financial due diligence are undertaken on all Prospectus/Offer Documents of all commercial papers prior to investment as stipulated in Section 2.9 of the Regulation on Investment of Pension Fund Assets.
