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Henry T Hu

Allan Shivers Chair in the Law of Banking and Finance

JD Yale
MA Yale
BS Yale

Professor Henry T. C. Hu holds the Allan Shivers Chair in the Law of Banking and Finance at the University of Texas Law School. In September 2009, Securities and Exchange Commission Chairman Mary L. Schapiro appointed him the inaugural Director of the Division of Risk, Strategy, and Financial Innovation. The first new Division in 37 years, "Risk Fin" was created to provide sophisticated, interdisciplinary analysis across the entire spectrum of SEC activities, including policymaking, rulemaking, enforcement, and examinations. He returned to academia in January 2011. See, e.g., (1) Kara Scannell, At SEC, Scholar Who Saw It Coming, Wall Street Journal, Jan. 25, 2010, at page C1, online version at http://online.wsj.com/article/SB10001424052748703415804575023402762491286.html; and (2) CNBC's "Squawk Box" - Feb. 23, 2011 (as "guest host"): (a) Fmr. SEC 'Risk Czar' Speaks Out, at http://www.cnbc.com/id/15840232?video=1811142035&play=1 and (b) Containing the Next Crisis, at http://www.cnbc.com/id/15840232?video=15840232?video=1811216641&play=1. Interested in an interdisciplinary approach to financial innovation and complex capital market and corporate governance issues generally, he has written on asset allocation; bank, derivatives, hedge fund, and mutual fund regulation; corporate control and disclosure; creditor, derivatives dealer, managerial, shareholder, and trader behavior; debt, equity, and hybrid "decoupling" through credit default swaps, equity swaps, securitization, and other means; director fiduciary duties; investor illiteracy; model risk; risk management; systemic risk; "time diversification"; and Warren Buffett. The writings have appeared in law reviews (e.g., Columbia Law Review, University of Pennsylvania Law Review, and Yale Law Journal), finance and specialist journals (e.g., European Financial Management, Journal of Applied Corporate Finance, and Risk), and newspapers (e.g., Financial Times, New York Times, and Wall Street Journal).

From a research standpoint, he is best known for his early articles on the risks posed by derivatives, articles on the corporate objective, and recent articles on "decoupling." A 1989 article argued that the pioneering 1988 Basel bank capital accord was inadequate in the face of modern financial innovation. A 1993 Yale Law Journal article receiving renewed attention in the wake of the global financial crisis showed how cognitive bias, compensation, financial "science," and other factors can lead "sophisticated" financial institutions to take undue risks and make other mistakes as to complex derivatives. The 1993 article also proposed responses, including creating an informational clearinghouse for derivatives. His research on the corporate objective had one unexpected result: in recognition of a 1995 derivatives/corporate governance article, an exchange-traded index derivative introduced in 1996 was assigned the ticker symbol of "HUI". Today, the "HUI" (NYSE Arca Gold BUGS Index) and "XAU" (PHLX Gold/Silver Sector Index) are the world's two most widely-followed indexes for gold mining stocks. His recent (2006-2009) research offered the first systematic analysis of debt and equity "decoupling," and coined terms that have come into worldwide use such as "empty voter," "empty creditor," and "hidden (morphable) ownership." The 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. This decoupling research has influenced governmental, capital market, and corporate developments. On August 1, 2009, what are sometimes called the "empty voting amendments" to the Delaware General Corporation Law became effective. On July 14, 2010, the SEC issued a concept release involving its most comprehensive review of the proxy voting infrastructure in 30 years, which release included analysis of decoupling issues such as empty voting.

Professor Hu teaches subjects such as corporate law, modern finance and governance, and securities regulation, and has also taught them at Harvard Law School. He has been chair of the Association of American Law Schools' Business Associations Section and a member of the Legal Advisory Board of the NASD (now Financial Industry Regulatory Authority) and the NASD and NASDAQ Market Regulation Committees. He is on the Editorial Board of the Oxford University Press's Capital Markets Law Journal. He has testified before Congress, including on behalf of the SEC as to landmark derivatives legislation. In 2010, the National Association of Corporate Directors named him as one of the 100 most influential people in corporate governance, based on a survey of 15,000 directors and executives. He holds a B.S. (Molecular Biophysics & Biochemistry), M.A. (Economics), and J.D., all from Yale. Sample Writings: Henry T. C. Hu, Misunderstood Derivatives: The Causes of Informational Failure and the Promise of Regulatory Incrementalism, 102 Yale Law Journal 1457-1513 (1993); Henry T. C. Hu and Jay Lawrence Westbrook, Abolition of the Corporate Duty to Creditors, 107 Columbia Law Review 1321-1403 (2007), http://ssrn.com/abstract=977582; Henry T. C. Hu and Bernard Black, Equity and Debt Decoupling and Empty Voting II: Importance and Extensions, 156 University of Pennsylvania Law Review 625-739 (2008), http://ssrn.com/abstract=1030721; Darrell Duffie and Henry T. C. Hu, Competing for a Share of Global Derivatives Markets: Trends and Policy Choices for the United States, a draft at http://ssrn.com/abstract=1140869 (2008); Henry T. C. Hu and Bernard Black, Debt, Equity, and Hybrid Decoupling: Governance and Systemic Risk Implications, 14 European Financial Management 663-709 (2008), at http://www.efmaefm.org/eufm_450_corrected.pdf; Henry T. C. Hu, 'Empty Creditors' and the Crisis - How Goldman's $7 billion was not 'material', Wall Street Journal, Apr. 10, 2009, at A13; Henry T. C. Hu and Terrance Odean, Paying for Old Age, New York Times, Feb. 26, 2011, at A19.

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