The House Energy and Commerce Committee yesterday unanimously approved a bill aimed at slowing Canadian takeovers of American energy firms.
The bill would impose on foreign investors the same margin requirements imposed on U.S. investors: They cannot borrow more than 50 percent of the price of a stock purchase.
Some recent Canadian takeovers have been completely financed by Canadian banks, thereby giving Canadians an edge over U.S. investors. "The issue that arose very clearly was that Americans were at a disadvantage facing Canadian companies or other investors," said subcommitee Chairman Timothy Wirth (D-Colo.).
In addition to imposing the margin requirements on foreign investors, the bill gives the targets of takeover attempts, their shareholders or other injured parties the right to sue privately, alleging margin violations, in cases where an investor acquired or sought to buy 5 percent or more of the stock of a firm.
The committee accepted an amendment that narrowed the possibility of private suits in other cases, for instance, by shareholders against brokers for violations of the margin rules.
Wirth said, however, that the committee will seek information from the Securities and Exchange Commission and self-regulatory groups that oversee the stock exchanges about how regularly the rules are breached and about other enforcement problems.
Similar legislation has been approved by a Senate committee and has broad support in the Congress.