The Nationwide Pension Fee (PenCom) has lifted its suspension on investments in industrial papers by Licensed Pension Fund Directors (LPFAs) the place non-bank capital market operators act as Issuing and Paying Brokers (IPAs).
This resolution comes after the Securities and Change Fee (SEC) took steps to handle regulatory issues associated to the function of those non-bank operators in industrial paper transactions.
In a round issued on December 3, 2024, and signed by Abdulqadir M. Dahiru, the Fee’s Head of the Funding Supervision Division, PenCom referenced its earlier directive, which known as for a right away halt on such investments.
The suspension had been put in place because of the lack of clear regulatory pointers governing the involvement of non-bank IPAs in industrial paper issuances. The Fee raised issues that the absence of guidelines from the SEC left these transactions outdoors established regulatory frameworks, doubtlessly exposing pension fund investments to pointless dangers.
Nevertheless, with the SEC now having developed draft guidelines and proposed amendments to Rule 8 (Exemptions) for the regulation of economic paper issuances by its regulated entities, PenCom has determined to carry the restriction. The up to date SEC guidelines intention to carry the involvement of non-bank IPAs inside regulatory boundaries, thereby addressing PenCom’s earlier issues.
The round learn: “The Fee has famous that the Securities and Change Fee (SEC) has developed draft guidelines and an modification to rule 8 (Exemptions) to manage the issuance of Industrial Papers by its regulated entities. Accordingly, the SEC is addressing the Fee’s concern concerning the function of non-bank IPAs in Industrial Paper transactions by bringing them inside regulatory boundaries.
“Consequently, to facilitate capital elevating and guarantee continued market stability, the Fee has lifted its restriction on LPFAS investing in industrial papers the place capital market operators act as IPAs. Nonetheless, LPFAS should make sure that applicable authorized and monetary due diligence is undertaken on all Prospectus/Supply Paperwork of all industrial papers previous to funding as stipulated in Part 2.9 of the Regulation on Funding of Pension Fund Belongings.”
Key highlights of the round
The suspension on LPFAs investing in industrial papers issued with non-bank capital market operators as IPAs is now formally lifted.
- LPFAs are required to hold out thorough authorized and monetary due diligence on all industrial paper prospectuses and supply paperwork earlier than continuing with investments. This aligns with PenCom’s Regulation on Funding of Pension Fund Belongings, particularly Part 2.9, which mandates stringent checks to make sure the protection and soundness of pension fund investments.
- The SEC’s draft guidelines and amendments to Rule 8 handle PenCom’s issues, making certain that each one events concerned within the industrial paper course of are adequately regulated, selling transparency and monetary stability out there.
- The lifting of this restriction is predicted to facilitate smoother capital-raising efforts within the Nigerian monetary markets, whereas additionally making certain that the integrity and stability of pension fund belongings are maintained. The choice to reinstate funding in these devices comes at a time when capital markets are more and more seen as a significant supply of funding for company entities and authorities initiatives.
PenCom has emphasised the significance of adhering to due diligence requirements, reminding LPFAs that this new funding alternative comes with the duty of safeguarding pensioners’ funds.
What it’s best to know
In October 2024, PenCom ordered Licensed Pension Fund Directors and Custodian Fund to right away droop additional funding in industrial papers the place capital market operators and non-banks, are engaged as IPAS.
PenCom in a round with Reference quantity : PENCOM/TECH/ISD/2024/402, dated October 23, 2024, by Head, Surveillance Division of PenCom, A.M. Saleem, addressed to Managing Administrators and Chief Executives Officers of all LPFAs, warned the LPFAs to desist from investing within the affected portfolio pending the issuance of pointers or rules on the issuance of economic papers by the Securities and Change Fee, SEC.
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