trary to our economic interests, depriving the United States of productive capacity or national resources and engaging in selective boycotts or predatory pricing; and (3) the use of a U.S. company to advance the objectives of a foreign nation.

Let me discuss the last of these potential dangers.

The revelation 2 weeks ago that Arab banks were using their immense economic power to try to force a boycott of Jewish investment banking interests was extremely sobering. Unconscionable religious discrimination of this is irreconcilable with American legal and moral principles. Its immediate significance for us, however, should be to make us leery of claims promulgated by certain highly placed administration spokesmen that economic power will never be used to win political objectives.

In light of the Arab boycott, I find it just short of incredible that Secretary Simon and his assistant, Mr. Parsky, have been so myopic as to claim there is no danger of Arab investors using their U.S. investment for political purposes or in a way detrimental to fundamental national commitments.

Surely among the most naive statements of recent times was Mr. Parsky's pronouncement that based on personal assurances from Arab leaders he had every reason to believe they intend to be responsible investors in our economy. It preceded by less than 1 month the Arab attempt to force Lazard Freres out of a U.S. underwriting syndicate. I am afraid I simply cannot share the administration's complacency. The Arab boycott of firms such as Ford, Coca-Cola, Kaiser, Motorola, and NBC has chilling implications. I do not believe we can ignore or rely on informal understandings to guard against the dangers inherent in our traditional open door policy toward foreign investment. Accordingly, Senator Brooke and I introduced yesterday an amendment to S. 425 which would absolutely prohibit any foreign investor who had engaged in a boycott of the sort practiced against Lazard Freres from acquiring more than a 5 percent interest in any U.S. company. Furthermore, if any foreign investor with more than a 5-percent interest in a U.S. company caused that company to engage in such a boycott, the voting rights of that investor could be frozen and his interest in the company sold.

Given the dramatic concentration of petrodollars in the Middle East and the global importance of preserving the continued economic and strategic well-being of the United States, I, for one, believe it is foolhardy not to have an established system to monitor all significant foreign investments. Yet today, we have little more than a hodgepodge of post hoc controls. There is no coordination of existing measures; nor are there even any effective techniques to assure adequate notice of completed foreign acquisitions, much less notice of proposed acquisitions.

Foreign investment in our economy could have telling significance for American interests, nationally and internationally. S. 425 uses the disclosure concept of the Securities Exchange Act of 1934 to improve the information flow about such investment. The clarification and simplification of the President's powers to prohibit such investments will assure the protection of the national economy.

Taking the two together, I believe this bill will provide necessary protections without creating burdensome impediments to the inward flow of foreign capital. Indeed, this bill assumes that our national policy will continue to favor maximum freedom of access to our capital markets.

Today we begin 3 days of hearings. I look forward to listening to the views of the many witnesses who will appear. I am convinced that out of this dialog we will be able to fashion a consistent and sensible approach to foreign investment in the United States.

[Copy of the bill being considered, the amendments and a letter from the Department of Commerce follow:]

94TH CONGRESS 1ST SESSION

S. 425

IN THE SENATE OF THE UNITED STATES

JANUARY 27, 1975

Mr. WILLIAMS introduced the following bill; which was read twice and referred to the Committee on Banking, Housing and Urban Affairs

A BILL

To amend the Securities Exchange Act of 1934 to require notification by foreign investors of proposed acquisitions of equity securities of United States companies, to authorize the President to prohibit any such acquisition as appropriate for the national security, to further the foreign policy, or to protect the domestic economy of the United States, to require issuers of registered securities to maintain and file with the Securities and Exchange Commission a list of the names and nationalities of the beneficial owners of their equity securities, and for other purposes.

1 Be it enacted by the Senate and House of Representa

2

tives of the United States of America in Congress assembled,

3 That this Act may be cited as the "Foreign Investment 4 Act of 1975".

2

SEC. 2. Subsection (a) of section 3 of the Securities

2 Exchange Act of 1934 (15 U.S.C. 78c (a)) is amended as 3 follows:

4 (a) Paragraph (9) thereof is amended to read as 5 follows:

6 "(9) The term 'person' means a natural person, com7 pany, government, or political subdivision, agency, or in8 strumentality of a government.".

9 (b) Paragraph (19) thereof is amended to read as 10 follows:

11

"(19) The terms investment company', 'affiliated per12 son', 'insurance company', 'separate account', and 'company' 13 have the same meanings as in the Investment Company Act 14 of 1940.",

15 (c) The subsection is further amended by adding at the 16 end thereof the following new paragraphs:

17

"(22) The term 'United States company' means any 18 corporation, limited partnership, or business trust organized 19 in one of the United States, the Canal Zone, the District of 20 Columbia, Guam, Puerto Rico, the Virgin Islands, or any 21 other possession of the United States (hereinafter in this title 22 collectively referred to as the 'United States') or any other 23 company with its principal place of business in the United 24 States.

25

"(23) The term 'foreign investor' means

1

2

3

4

5

6

7

8

9

10

11

12

13

14

3

'(1) a natural person resident outside the United

States;

"(2) a company other than a United States

company;

"(3) a government of a country other than the United States or a subdivision, agency, or instrumentality of such a government (hereinafter in this title collectively referred to as a foreign government');

"(4) a United States company controlled by a person described in paragraph (1), (2), or (3) of this subsection; or

"(5) two or more persons acting in concert for the purpose of acquiring, holding, voting, or disposing of securities, at least one of whom is a person described in paragraph (1), (2), (3), or (4) of this subsection.". SEC. 3. Section 13 of the Securities Exchange Act of 17 1934 (15 U.S.C. 78m) is amended as follows:

15

16

18

(a) Paragraph (1) of subsection (d) thereof is

19 amended to read as follows:

20

"(d) (1) Any person who, after acquiring directly or 21 indirectly the beneficial ownership of any equity security of 22 a class which is registered pursuant to section 12 of this 23 title, or any equity security of an insurance company which 24 would have been required to be so registered except for the 25 exemption contained in section 12 (g) (2) (G) of this title,