PenCom lifts ban on pension fund investments in commercial papers

The National Pension Commission (PenCom) has announced the lifting of its suspension on pension fund investments in commercial papers where non-bank capital market operators serve as Issuing and Paying Agents (IPAs).

This decision was disclosed in a statement on Tuesday and follows recent regulatory developments from the Securities and Exchange Commission (SEC).

PenCom had imposed the suspension on October 23, 2024, due to concerns about the absence of governing rules for non-bank IPAs in the issuance of commercial papers. The suspension affected
Licensed Pension Fund Administrators (LPFAs), who were instructed to halt further investments in commercial papers involving such operators.

However, PenCom noted that “SEC has developed draft rules and an amendment to rule 8 (Exemptions) to regulate the issuance of Commercial Papers by its regulated entities.”

“Accordingly, SEC is addressing PenCom’s concern about the role of non-bank IPAs in Commercial Paper transactions by bringing them within regulatory boundaries,” PenCom said.

PenCom, however, noted that to facilitate capital raising and ensure continued market stability, it has lifted the restriction on LPFAs investing in commercial papers where capital market operators act as IPAs.

Despite lifting the restriction, PenCom also reminded LPFAs of their obligation to conduct thorough legal and financial due diligence on all commercial paper documents before making investments.

PenCom added, “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 is 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.”