In a decisive move aimed at protecting the integrity of pension investments, the National Pension Commission (PenCom) has directed Licensed Pension Fund Administrators (LPFAs) to suspend all further investments in commercial papers involving capital market operators and non-bank entities as Issuing and Placing Agents (IPAs). The directive, issued in a circular with reference number PENCOM/TECH/ISD/2024/402, dated October 23, 2024, was signed by A.M. Saleem, Head of PenCom’s Surveillance Department.
The circular, addressed to the Managing Directors and Chief Executive Officers of all LPFAs, highlighted PenCom’s concern regarding the rising trend of LPFAs investing in commercial papers issued by limited liability companies. Many of these companies have engaged capital market operators as IPAs to oversee issuance and placement processes.
PenCom noted that although commercial papers are becoming a popular investment choice, the Securities and Exchange Commission (SEC) has yet to establish specific rules or guidelines governing the issuance of such papers, which raises regulatory concerns. The lack of structured guidelines could expose pension funds to unnecessary risk, given the uncertainty around the processes involved.
According to the directive, “All LPFAs are directed to immediately suspend further investment in commercial papers where capital market operators (non-banks) are engaged as IPAs.” The suspension will remain in place until the SEC issues comprehensive guidelines to regulate these investments adequately.
PenCom has advised all pension fund administrators to act swiftly in ensuring full compliance with the circular, underscoring its commitment to safeguarding contributors’ funds in an environment with well-defined regulations.