PenCom Lifts Restriction On LPFAs Investing In Commercial Papers

By Oluwakemi Kindness

The National Pension Commission (PenCom) has lifted restriction on Licensed Pension Fund Administrators (LPFAs) investing in commercial papers where capital market operators act as Issuing and Paying Agents (IPAs).

PenCom announced the decision in a Circular issued on Tuesday and signed by the management of PenCom led by Omolola Oloworaran as Director-General.

PenCom had in October 2024 directed all LPFAs to 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.

“The National Pension Commission (PenCom) refers to its circular of 23 October 2024 on the above subject, in which it directed 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”.

However, in the current Circular, the Commission noted that the Security and Exchange Commission (SEC) has developed draft rules and an amendment to rule 8 (Exemptions) to regulate the issuance of Commercial Papers by its regulated entities.

PenCom disclosed that SEC is addressing its concern about the role of non- bank IPAs in Commercial Paper transactions by bringing them within regulatory boundaries.

“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”.

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