Robert Khuzami, the SEC's enforcement director testifying before a House panel has told lawmakers that an explicit ban on insider trading by federal lawmakers could narrow existing law covering the conduct.  Khuzami said any changes need to be "carefully calibrated" so that they do not hurt insider trading prosecutions outside of Congress. While the SEC prosecutes insider trading under general anti-fraud provisions, the agency has never used the laws to go after members of Congress.

The House Financial Services Committee is considering legislation that would prohibit members of Congress and their staff from trading in securities or commodities based on non-public information gleaned through their jobs.  The proposed legislation targets information related to pending legislation, for example, and might exempt information obtained through a regulatory briefing, he said. Khuzami suggested lawmakers instead create an explicit fiduciary duty between members of Congress to keep information gained on the job confidential and not use it for private gain. The agency would be able to use that general duty to go after insider trading in Congress, he said. "Highlighting a duty by members of Congress ... is the simplest way to go," he said. The bill has languished in Congress for the past five years, but saw renewed interest after a recent television report on "60 Minutes" that found some lawmakers profited from inside information.  The chairman of the House committee, Spencer Bachus, was one of the lawmakers singled out by the report for trading stock options after a Treasury briefing about the economic collapse in 2008. At Tuesday's hearing, he said he would schedule a markup of the legislation. A Senate panel considered similar legislation last week.  [Reuters 12/6/11]