By Yinka Kolawole, with agency report
The National Pension Commission (PenCom) has introduced a framework to guide pension fund administrators (PFAs) on engagement in securities lending and repurchase transactions (repos).
Securities lending is a transaction where securities are temporarily transferred from a lender to a borrower, typically in exchange for a fee or collateral, while Repos are the sale of securities with a simultaneous agreement to repurchase them at a specified price on a specified date.
Director of Surveillance Department at PenCom, A. M. Saleem, in a circular said that reporting and disclosure of quarterly statement to PenCom include the value of securities on loan (by asset class).
Saleem said the quarterly reports also include a list of counterparties and exposures, composition and valuation of collateral, and income earned and fees paid.
For annual reports to retirement savings account (RSA) holders, the director said PFAs shall disclose securities lending and repo activities, revenue earned, and agent arrangements.
According to Saleem, securities lending and repo positions must be clearly disclosed in the notes to the financial statements of the fund,
He said PFAs shall disclose, in both quarterly returns to the commission and annual reports to RSA holders, the gross revenue earned from securities lending and repo transactions.
“The total fees and expenses deducted, with a breakdown of each component (agent fees, custodial fees, operational costs),” he said.
“The net revenue credited to the fund; the identity of any agent, lender, or third party receiving a share of lending revenue, any affiliation between the PFA and the agent lender, where applicable
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