PenCom Mandates PFAs to Suspend Investment in Commercial Papers

The National Pension Commission (PenCom) has directed licensed pension fund administrators (LPFAs) to suspend further investment in commercial papers with immediate effect.

Commercial paper is a short-term debt instrument issued by corporations to finance inventory, accounts payable, payroll, and other short-term liabilities.

In a circular with reference number, ‘PENCOM/TECH/ISD/2024/402’, dated October 23, and signed by the Head surveillance department of PenCom,  A.M. Salem, the commission said Securities Exchange Commission (SEC) did not have established regulatory framework on the issue.

According the News Agency of Nigeria, the circular was addressed to managing directors and chief executives officers (CEOs) of all LPFAs

PenCom warned the LPFAs to desist from investing in the affected portfolio pending the issuance of guidelines on the issuance of commercial papers by the SEC.

“PenCom has noted the increased investment by Licensed Pension Fund

Administrators (LPFAs) in commercial papers issued by limited liability companies,” the commission said.

“It has also observed that the issuing companies have engaged capital market operators as Issuing and Placing Agents (IPAs) to manage the issuance and placement of these commercial papers. However, the commission has become aware that SEC, the regulator of the capital market, currently lack established rules and regulations governing the issuance of commercial papers. Consequently, all LPFAs are directed to immediately suspend further investment in commercial papers where capital market operators (non-banks) are engaged as IPAS,” the agency said.

PenCom said the directive stands “pending the issuance of guidelines or regulations on the issuance of commercial papers by SEC”.

Furthermore, PenCom advised the operators to promptly take all necessary steps to guarantee full compliance with the circular.