enable brokerage firms, through their registered Making arrangements to store customers' responses either manually or by means of automated systems. Designing and maintaining methods to update such storage systems. Developing and instituting automated programs and/or other manual procedures which would generate the desired information to be forwarded to issuers; it should be recognized that since systems may vary in degree from one back office to another, so, too, will the output; also, special arrangements may be required in a significant number of cases to meet the particular mailing techniques of certain issuers. Checking procedures would have to be developed to prevent errors with respect to those customers who desire the benefits of having their securities held in "Street Name"; note, also, that as a consequence of COPOC's proposal brokers would be required to operate two different systems simultaneously. Designing and implementing new and more sophisticated systems to guarantee compliance with the rules and regulations of the regulatory bodies; additionally, increased regulation of issuers may also be necessary. It is important to note that none of the items mentioned above are currently in existence. Also, it would be necessary to institute all of them on an on-going basis. Obviously, the developmental period would be somewhat lengthy. The key point, however, is that the expenses involved could become a heavy burden during a period of declining profitability. Indeed, if reimbursement does not include the developmental costs of such systems, some small-sized and medium-sized firms may find the 49-480 - 75 - 29 entire project prohibitive. In any event, I would suggest that it would be extremely difficult to arrive at a rate of reimbursement for providing the names of beneficial holders. 2. Injuries to Business The Securities Industry Association maintains that a securities firm should not be required under any mandate to release to a corporation its list of customers' names unless the corporation can insure that it can regulate and guard against disclosure of the list. Since the alternative systems proposed by COPOC and Mr. Reuter do not set forth any concrete methods to protect against disclosure, particularly with respect to third persons who may also have access to the list; the Association objects to the adoption of any rules or regulations which would require such a release. 3. Banks As a practical matter, I have a great deal of difficulty envisioning banks and brokerage firms operating under two separate systems. Basically, I submit that such a situation will cause unfair competition and unnecessary chaos from an operational standpoint. Thus, unless a more definite proposal can be submitted with respect to considerations and possible action on the part of the Comptroller of the Currency, I would submit that the Commission should stay its own determination of this matter. In conclusion, I wish to state that the Securities Industry Association fully agrees with the proposition that disclosure is meaningless without effective dissemination of material information. However, it also believes that constructive change can only be accomplished pursuant to a realistic appraisal of the issues and facts in question. In the matter at hand, it is our position that, in fact, there is no real basis to support the recommendation to eliminate the existing procedures in connection with the dissemination of corporate material to beneficial owners whose stock is held in "Street Name". The Association would also like to take this opportunity to suggest that, as a practical means of resolving any difficulties regarding this matter, consideration should be given to the selection of a joint panel of corporate and securities The panel would be responsible for identi representatives. fying key issues and topics and having them submitted for objective analysis. Senator WILLIAMS. Mr. Thomas L. Farmer, chairman of the task force on foreign investment of the U.S. Chamber of Commerce. STATEMENT OF THOMAS L. FARMER, CHAIRMAN, TASK FORCE ON FOREIGN INVESTMENT IN THE UNITED STATES, THE CHAMBER OF COMMERCE OF THE UNITED STATES; ACCOMPANIED BY L. OAKLEY JOHNSON, STAFF EXECUTIVE Mr. FARMER. Thank you, Mr. Chairman. If I may, I would like to read parts of our statement and request that the entire statement be included in the record. Senator WILLIAMS. Your complete statement will be made a part of the record. [The complete statement is printed at p. 451.] Mr. FARMER. I am Thomas L. Farmer, partner in the Washington, D.C. law firm of Prather, Levenberg, Seeger, Doolittle, Farmer & Ewing and chairman of the task force on foreign investment in the United States of the Chamber of Commerce of the United States, on whose behalf I am appearing today. Accompanying me is L. Oakley Johnson, staff executive for the task force. I would like to add a brief clarification. There was some mention here of witnesses testifying yesterday on behalf of the international section of the Chamber of Commerce. I believe Mr. MacGregor and Mr. Ball were testifying yesterday for the U.S. Council of the International Chamber of Commerce, which is an organization separate from the Chamber of Commerce of the United States which I represent. We appreciate this opportunity to discuss aspects of foreign investment in the United States related to S. 425, the Foreign Investment Act of 1975. On balance, we oppose the legislation as now written, while supporting some of its specific features. Our interest in this subject stems from a responsibility to represent our membership, composed of over 46,000 business firms, 2,600 local and State chambers of commerce, 1,100 trade associations, and 39 American chambers of commerce abroad. This diversity of membership has obliged us to view the impact of foreign investment in the United States from the perspective of both American business interests abroad and the domestically oriented business community. The national chamber's board of directors, on February 21, reaffirmed our opposition to new Presidential authorities, such as those proposed in S. 425, to screen foreign investment in the United States. Such blanket authority would reverse the "open door" policy of the United States toward foreign investment in the absence of any convincing evidence of the need for such a radically different approach. It is a matter of public record that the national chamber attaches a great deal of importance to the increasingly significant impact of transnational investment flows that take place between the United States and the rest of the world. Last year, the chamber testified before four different congressional committees on the issue of foreign investment in the United States. In addition, we sponsored a 2-day symposium on the subject in February 1974, the proceedings of which constitute the report, "Foreign Investment in the United States." This report outlines U.S. business regulations and procedures particularly relevant to foreign investors in our economy. In preparation for its testimony last year before the Senate Banking Subcommittee on International Finance, chaired by Senator Stevenson, we developed and submitted for the record a "Staff Report on Restrictions to Foreign Investment in Special U.S. Commercial Activities." This report has been used by many private and public organizations as a basic reference for further documentation on specific Federal restrictions that apply to foreign investors only. And, in a broader context, the national chamber has developed a set of guidelines, "Elements of Global Business Conduct," which we expect will contribute to a better understanding of international investment whether coming into or going out of the United States. A copy of the original 1974 staff report is attached to this statement. and we request that the other two documents be included in the record. Senator WILLIAMS. They will be (see p. 454). Mr. FARMER. In short, we believe in the importance of taking a broad view of the international investment issue. Foreign investment in the United States is a critically important part of a delicate and complex economic equation. Just as all parts belong to a whole, American economic vitality is essential to the health of the world economy. We come before you today with this perspective in mind. Beginning with the hearings in January 1974, the national chamber's position on foreign investment in the United States has had the following four basic characteristics: First. We welcome foreign investment because of the positive impact that foreign capital and technology have on the United States economy and our balance of payments; Second. We support the principle of "national treatment" for foreign investors, except in instances where there is a clearly established overriding national interest consideration-and expect other governments to do so as well; Third. We oppose any new reporting requirements for foreign firms that would not also apply to United States firms; and, Fourth. We recognize a serious data gap and support a thorough executive branch analysis of the issue of foreign direct and portfolio investment in the United States before considering any changes in existing U.S. Government policy. This subcommittee is holding hearings today amidst growing public anxiety. Consternation is expressed by many over the sudden accumulation of excess revenues by certain oil-exporting countries. Foreign takeover, threats to our economic security, and investment for political objectives are among the most frequently expressed concerns. Preliminary analysis indicates that the vast bulk of the investments of excess oil earnings in the industrialized countries is in portfolio investment or investment in money market instruments-forms of investment which are significantly different from the more visible or direct type of investment. Yet we believe that this new source and type of foreign investment in the United States is not, in itself, a sufficient reason for major changes in our traditional policies toward foreign investment here. Continuation of our relatively "open door" is as critical now as it has ever been. The demand for investment capital in the U.S. continues |