U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16272 / September 3, 1999
Securities and Exchange Commission v. David D. Tsang, Maggie I. Hsin Yu Zahn and Robert D. Tsang, Civil Action No. 99-06351 RSWL (VAPx) (C.D. Cal.)
On September 3, 1999, the Securities and Exchange Commission ("Commission") announced the settlement of an action against three defendants filed on June 22, 1999, in federal court in Los Angeles, which charged charging insider trading in the securities of Oak Technology, Inc. ("Oak"), a company located in Sunnyvale, California, and a primary manufacturer of CD-ROM controllers. The defendants are:
The Commission's complaint alleges that David, while he was the chairman and president of Oak, learned that Oak would have better than anticipated financial results for the quarter that ended December 31, 1995. Before Oak publicly announced the earnings information, David often spoke with his brother Robert. The complaint further alleges that David, on at least one occasion, conveyed nonpublic information about Oak's business. The day before and the day of Oak's press release, Robert and Maggie together bought $239,000 in Oak call options. David did not trade. After Oak publicly announced its quarterly results, Oak shares rose from $44 1/4 on January 23 to $54 1/4 on January 24, a 23% increase. The Oak options purchased by Robert and Maggie shortly before the press release increased from $6 7/8 on January 23 to $14 5/8 on January 24, a 113% increase. Robert and Maggie sold their Oak options on January 25 for a two-day profit of $283,000.
The Commission charged the defendants with insider trading in violation of the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. All three defendants, without admitting or denying the allegations in the Complaint, consented to the entry of judgments enjoining them from future antifraud violations and ordering them to pay, jointly and severally, $283,000 in disgorgement, plus prejudgment interest and $283,000 in civil penalties. The Commission acknowledges the assistance by the American Stock Exchange in connection with this matter.