named first director of the SEC’s new division of Risk, Strategy, and Financial Innovation
Henry Hu
Professor Henry T. C . Hu, holder of the Allan Shivers Chair in the Law of Banking and Finance at the Law School, was named director of the newly-established Division of Risk, Strategy, and Financial Innovation at the Securities and Exchange Commission (SEC). Mary L. Schapiro, chairman of the SEC, announced the appointment September 16.
According to the SEC announcement, the new division “combines the Office of Economic Analysis (OEA), the Office of Risk Assessment (ORA), and other functions to provide the Commission with sophisticated analysis that integrates economic, financial, and legal disciplines. The division’s responsibilities cover three broad areas: risk and economic analysis; strategic research; and financial innovation. With the creation of the new division, the SEC now has five divisions, including the Division of Corporation Finance, the Division of Enforcement, the Division of Investment Management, and the Division of Trading and Markets. According to one report, this is the first new division at the SEC since 1972.
“We are enormously proud of Professor Hu,” University of Texas School of Law Dean Larry Sager said. “He has been guiding us all through the intricacies of the financial crisis. We are happy to lend Henry’s acute intellect and deep understanding of risk and regulation in the financial markets to the SEC.”
In the SEC announcement, Chairman Schapiro said, “I am pleased Professor Hu agreed to accept this leadership role. His vast understanding of the complexities of the markets will be put to good use on behalf of investors as he leads this new division. I welcome Henry to the SEC, and look forward to benefitting from his insightful counsel.”
Hu said the creation of the new division comes at a seminal time. “The derivatives revolution, the rise of hedge funds and institutional investors, technological change, and other factors have transformed both capital markets and corporate governance,” Hu said. “I look forward to working with the Commission and to using an interdisciplinary approach that is informed by law and modern finance and economics, as well as developments in real world products and practices on Wall Street and Main Street.”
The new division will perform all of the functions previously performed by OEA and ORA, along with the following: (1) strategic and long-term analysis; (2) identifying new developments and trends in financial markets and systemic risk; (3) making recommendations as to how these new developments and trends affect the Commission’s regulatory activities; (4) conducting research and analysis in furtherance and support of the functions of the Commission and its divisions and offices; and (5) providing training on new developments and trends and other matters.
Interested in law and modern finance, Hu has written on asset allocation, the regulation of banks, derivatives, hedge funds, and mutual funds, corporate governance, financial rationality and sophistication, the global “competitiveness” of U.S. derivatives markets, model risk, risk management, swaps and other financial innovations, time diversification, and Warren Buffett. Recently, Hu was the lead author on a series of pioneering articles on the “decoupling” of debt and equity, its impact on corporate and debt governance and world systemic risk, and possible disclosure and substantive responses. This “decoupling” research has attracted attention, including a lead front-page story in the Wall Street Journal and stories in the Economist, the Financial Times, and the New York Times.
Hu holds a BS in molecular biophysics and biochemistry, an MA in economics, and a JD, all from Yale University.