# UNITED STATES OF AMERICA

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URL: https://www.frixlaw.com/law-library/documents/agency%3Asec%3A1b4f2d5ef31bbb49

## Record

- **Collection:** Agency decision
- **Document type:** Agency decision

## Text

UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION

ADMINISTRATIVE PROCEEDING
File No. 3-17956

In the Matter of
MagnaChip Semiconductor
Corporation and Margaret HyeRyoung Sakai, CPA,
Respondents.
I.

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PROPOSED PLAN OF
DISTRIBUTION

OVERVIEW

1.
The Division of Enforcement submits this Proposed Plan of Distribution (the
“Plan”) to the United States Securities and Exchange Commission (the “Commission”) pursuant
to Rule 1101 of the Commission’s Rules on Fair Fund and Disgorgement Plans (the
“Commission’s Rules”), 17 C.F.R. § 201.1101. This Plan provides for the distribution of a Fair
Fund (the “Fair Fund”), comprised of civil money penalties paid by MagnaChip Semiconductor
Corporation and Margaret Hye-Ryoung Sakai, CPA (collectively, the “Respondents”) in the
above-captioned matter.1
2.
As described more specifically below, the Plan seeks to compensate investors
who were harmed by the Respondents’ conduct described in the Order, in connection with a
scheme involving improper and fraudulent accounting practices intended to artificially inflate
revenue and meet gross margin targets it had previously announced to the public. As calculated
using the methodology detailed in the Plan of Allocation (attached as Exhibit A), investors will
be compensated for their losses on shares of MagnaChip common stock (the “Security”) that
were purchased between February 1, 2012 and February 12, 2015, inclusive (the “Relevant
Period”). In the view of the Commission staff and the Fund Administrator, this methodology
constitutes a fair and reasonable allocation of the Fair Fund.
3.
The Commission has custody of the Fair Fund and shall retain control of the
assets of the Fair Fund. The Plan is subject to approval by the Commission, and the Commission
retains jurisdiction over its implementation.
1

See Order Instituting Public Administrative and Cease-and-Desist Proceedings Pursuant to Section 8A of the
Securities Act of 1933, Sections 4C and 21C of the Securities Exchange Act of 1934, and Rule 102(e) of the
Commission’s Rules of Practice, Making Findings, and Imposing Remedial Sanctions and Cease-and-Desist Orders,
Securities Act Rel. No. 10352 (May 1, 2017) (the “Order”).

II.

BACKGROUND

4.
On May 1, 2017, the Commission issued the Order instituting and simultaneously
settling administrative and cease-and-desist proceedings against the Respondents. In the Order,
the Commission found that Respondents violated the antifraud, books and records and internal
control provisions of the federal securities laws, when it began engaging in a variety of practices
to inappropriately inflate its revenues and meet the gross margin targets it previously had
announced to the public. As a result, MagnaChip’s financial statements and related disclosures
were materially misstated in its periodic, annual, and current reports filed with the Commission.
MagnaChip also falsely stated in an October 2013 press release that it had met its revenue and
gross margin guidance for ten consecutive quarters following its IPO. Following an internal
investigation, MagnaChip self-reported the revenue issues and, as a result, MagnaChip restated
its financial statements in early 2015, reducing its previously reported revenue for 2011 through
2013 by $121 million. In total, the Commission ordered the Respondents to pay $3,135,000 in
civil money penalties to the Commission. The Commission also created the Fair Fund, pursuant
to Section 308(a) of the Sarbanes-Oxley Act of 2002, so the penalties paid can be distributed to
harmed investors.
5.
The Respondents have paid $3,134,999.99. The Fair Fund has been deposited at
the United States Department of the Treasury’s Bureau of the Fiscal Service (“BFS”) for
investment, and any accrued interest will be for the benefit of the Fair Fund.
III.

DEFINITIONS
As used in this Plan, the following definitions will apply:

6.
“Administrative Costs” shall mean any administrative costs and expenses,
including without limitation the fees and expenses of the Tax Administrator and the Fund
Administrator, tax obligations, bond premium expenses, and investment and banking costs.
7.
“Claim Form” means the form designed by the Fund Administrator, in
consultation with the Commission staff, for the Preliminary Claimants to file their claims in
accordance with this Plan. The Claim Form will require, at a minimum, sufficient
documentation reflecting any Preliminary Claimant’s purchases and dispositions of Securities
during the Relevant Period such that eligibility under the Plan can be determined, tax
identification and other related information from the Preliminary Claimant as determined
necessary by the Fund Administrator in coordination with the Tax Administrator, and a
certification that the Preliminary Claimant is not an Excluded Party. Class Action Authorized
Claimants will not be required to submit a Claim Form.
8.
“Claim Status Notice” means the notice sent by the Fund Administrator within
ninety (90) days of the Claims Bar Date to all Preliminary Claimants who submitted a Claim
Form; all Class Action Second Settlement Claimants who timely submitted a Personalized Claim
Form, or otherwise responds to his, her, or its Plan Notice; and all Class Action Authorized
Claimants whose claims have been identified as possibly fraudulent. The Claim Status Notice
2

will set forth the Fund Administrator’s determination of the eligibility of the claim (eligible,
partially or wholly deficient, or ineligible). The Claim Status Notice will provide to each
Preliminary Claimant and Class Action Second Settlement Claimant whose claim is deficient, in
whole or in part, the reason(s) for the deficiency and in the event the claim is denied, the Claim
Status Notice will state the reason(s) for such denial. The Claim Status Notice will also notify
the Preliminary Claimant or Class Action Second Settlement Claimant of the opportunity to cure
any deficiency or dispute the determination made by the Fund Administrator, and will provide
instructions regarding what is required to do so.
9.
“Claims Bar Date” means the date established in accordance with this Plan by
which (a) a Class Action Second Settlement Claimant’s Personalized Claim Form or (b) a
Preliminary Claimant’s Claim Form must be postmarked or submitted electronically in order to
receive consideration under the Plan. The Claims Bar Date shall be one hundred twenty (120)
days after the initial mailing of the Claims Packet. Claim Forms submitted by Preliminary
Claimants and Class Action Second Settlement Claimants that are postmarked or received after
the Claims Bar Date will not be accepted unless the Fund Administrator is directed to do so by
the Commission staff.
10.
“Claims Packet” means the materials relevant to submitting a claim that will be
provided to Preliminary Claimants and Class Action Second Settlement Claimants known to the
Fund Administrator or to those who request such materials prior to the Claims Bar Date. The
Claims Packet for Preliminary Claimants will include, at a minimum, a copy of the Plan Notice
and a Claim Form (together with instructions for completion of the Claim Form). The Claims
Packet for the Class Action Second Settlement Claimants will include, at a minimum, a copy of
the Plan Notice and a Personalized Claim Form.
11.
“Class Action” shall mean Thomas, et al. v. MagnaChip Semiconductor Corp., et
al., Case No.: 3:14-cv-01160-JST (N.D. Cal), in which the consolidated amended complaint was
filed June 26, 2015.
12.
“Class Action Authorized Claimant” means a Person who filed an approved
claim in the first Class Action settlement involving investments occurring between February 1,
2012 and February 12, 2015, inclusive.
13.
“Class Action Second Settlement Claimant” means a Person who filed an
approved claim only in the second Class Action settlement, whose claim included the period
from February 1, 2012 through and including March 11, 2014, and excluded the period from
March 12, 2014 through February 12, 2015, inclusive.
14.
“Distribution Payment” means a payment from the Fair Fund to a Payee in
accordance with the terms of this Plan.
15.
“Eligible Claimant” means a Class Action Authorized Claimant, or a
Preliminary Claimant or Class Action Second Settlement Claimant who submitted a valid claim,
and who is not an Excluded Party.

3

16.

“Excluded Party” shall mean:
(a)

The Respondents;

(b)

Present or former officers or directors of Respondents or any assigns,
creditors, heirs, distributees, spouses, parents, siblings, dependent children
or controlled entities of any of the foregoing Persons or entities;

(c)

Any employee or former employee of the Respondents or any of its
affiliates who has been terminated for cause or has otherwise resigned, in
connection with the conduct described in the Order;

(d)

Any Person who, as of the Claims Bar Date, has been the subject of
criminal charges related to the conduct described in the Order or any
related Commission action;

(e)

Any firm, trust, corporation, officer, or other entity in which Respondents
have or had a controlling interest;

(f)

The Fund Administrator, its employees, and those Persons assisting the
Fund Administrator in its role as the Fund Administrator; or

(g)

Any purchaser or assignee of another Person’s right to obtain a recovery
from the Fair Fund for value; provided, however, that this provision shall
not be construed to exclude those Persons who obtained such a right by
gift, inheritance or devise.

The Claim Form will require claimants to certify that they are not an Excluded
Party.
17.
“Fair Fund” means the fund, comprised of the $3,134,999.99 paid by the
Respondents and created by the Commission pursuant to Section 308(a) of the Sarbanes-Oxley
Act of 2002, for the benefit of investors harmed by Respondents’ violations described in the
Order.
18.
“Final Determination Notice” shall mean the written notice sent by the Fund
Administrator to any Preliminary Claimant, Class Action Authorized Claimant, or Class Action
Second Settlement Claimant who timely responded to the Claim Status Notice in an effort to
cure a deficiency or dispute the determination made by the Fund Administrator, notifying the
Preliminary Claimant, Class Action Authorized Claimant, or Class Action Second Settlement
Claimant of its determination. The Final Determination Notice will constitute the Fund
Administrator’s final ruling regarding the status of the claim.
19.
“Net Available Fair Fund” means the Fair Fund, plus any interest or earnings,
less Administrative Costs.

4

20.
“Payee” means an Eligible Claimant who is determined to receive a Distribution
Payment, as calculated in accordance with the Plan of Allocation.
21.
“Person” means natural individuals as well as legal entities such as corporations,
partnerships, limited liability companies, or trusts.
22.
“Personalized Claim Form” means a form drafted by the Fund Administrator, in
consultation with the Commission staff, for Class Action Second Settlement Claimants to file
transaction data from March 12, 2014 through and including February 12, 2015, as well as
holding data as of the close of trading on February 12, 2015. The Personalized Claim Form will
require, at a minimum, sufficient documentation reflecting any Class Action Second Settlement
Claimant’s purchases and dispositions of Securities during the Relevant Period such that
eligibility under the Plan can be determined, tax identification and other related information from
the Class Action Second Settlement Claimant as determined necessary by the Fund
Administrator in coordination with the Tax Administrator, and a certification that the Class
Action Second Settlement Claimant is not an Excluded Party. Class Action Authorized
Claimants will not be required to submit a Personalized Claim Form.
23.
“Plan Notice” means a written notice from the Fund Administrator sent to
Preliminary Claimants and Class Action Second Settlement Claimants within ninety (90) days of
the Plan’s approval informing the Preliminary Claimants and Class Action Second Settlement
Claimants of the Fair Fund and how to participate in the distribution of the Fair Fund. For Class
Action Second Settlement Claimants, the Plan Notice and Personalized Claim Form will indicate
that he, she, or it is required to return the additional documentation, as detailed therein, for the
period between March 12, 2014 through and including February 12, 2015 to complete their claim
to participate in the distribution. For the Preliminary Claimants, the Plan Notice and Claim Form
will provide instructions as to what is required to participate in the distribution of the Fair Fund.
The Plan Notice will also be available on the Fair Fund’s website, which is maintained by the
Fund Administrator.
24.
“Plan of Allocation” means the methodology by which an Eligible Claimant’s
Recognized Loss is calculated. The Plan of Allocation is attached as Exhibit A.
25.
“Postcard Notice” means the notice designed by the Fund Administrator, in
consultation with the Commission staff, that will be mailed to Class Action Authorized
Claimants to notify them of the Fair Fund and advise them that they do not have to file another
claim form.
26.
“Preliminary Claimant” shall mean a Person, or his, her, or its lawful successor,
who is not a Class Action Authorized Claimant or a Class Action Second Settlement Claimant,
whose name and address is in the Fund Administrator’s Class Action database as having a
possible claim to recover from the Fair Fund under this Plan, including those who opted-out of
participating in the Class Action, or a Person who traded during the Relevant Period and is
asserting prior to the Claims Bar Date that he, she, or it has a possible claim to recover from the
Fair Fund under this Plan.

5

27.
“Recognized Loss” means the amount of loss calculated for an Eligible Claimant
in accordance with the Plan of Allocation.
28.
“Relevant Period” means the period of time between February 1, 2012 and
February 12, 2015, inclusive.
29.
“Securities” refers to shares of MagnaChip common stock listed on a U.S.
exchange and registered with the Commission and traded under the symbol MX.
30.
“Summary Notice” means the notice published on an Internet based newswire
service with national distribution and the Plan Notice with the Claim Form published with the
Depository Trust Company (“DTC”) on its Legal Notice System (“LENS”). LENS provides
DTC participants the ability to search and download legal notices, as well as to receive e-mail
alerts based on particular notices or particular Committee on Uniform Securities Identification
Procedures (“CUSIPs”), once a legal notice has been posted.
31.
“Third-Party Filer” means a third-party, including without limitation a nominee,
custodian, or an intermediary holding in street name, who is authorized to submit and submits a
claim(s) on behalf of one or more Preliminary Claimants or Class Action Second Settlement
Claimants. Third-Party Filer does not include assignees or purchasers of claims, who are
Excluded Parties and are therefore not eligible to receive Distribution Payments.
IV.

TAX COMPLIANCE

32.
On June 14, 2018, the Commission appointed Miller Kaplan Arase LLP as the tax
administrator (the “Tax Administrator”) for the Fair Fund to handle the tax obligations of the
Fair Fund.2 The Tax Administrator will be compensated for reasonable fees and expenses from
the Fair Fund in accordance with its Revised 2017-2018 Engagement Letter Agreement with the
Commission.3
33.
The Fair Fund constitutes a Qualified Settlement Fund (“QSF”) under Section
468B(g) of the Internal Revenue Code of 1986, as amended, 26 U.S.C. § 468B(g), and related
regulations, 26 C.F.R. §§ 1.468B-1 through 1.468B-5. The Tax Administrator is the
administrator of such QSF, for purposes of Treas. Reg. § 1.468B-2(k)(3)(I) and shall satisfy the
tax-related administrative requirements imposed by Treas. Reg. § 1.468B-2, including, but not
limited to:
(a)

Obtaining a taxpayer identification number;

(b)

Requesting funds necessary for the timely payment of all applicable taxes,
the payment of taxes for which the Tax Administrator has received funds,
and the filing of applicable returns; and

2

See Order Appointing Tax Administrator, Exchange Rel. No. 83437 (June 14, 2018).
See Omnibus Order Directing the Appointment of Tax Administrator in Administrative Proceedings that Establish
Distribution Funds, Exchange Act Rel. No. 81057 (June 30, 2017).
3

6

(c)

Fulfilling any information reporting or withholding requirements required
for distributions from the Fair Fund.

34.
All tax obligations will be paid from the Fair Fund, subject to the review and
approval of Commission staff.
V.

FUND ADMINISTRATOR

35.
On March 19, 2020, the Commission appointed Strategic Claims Services as the
fund administrator for the Fair Fund (the “Fund Administrator”). The Fund Administrator has
obtained a bond in the amount of $3,134,999.99, as ordered.4 Pursuant to Rule 1105(a) of the
Commission’s Rules, 17 C.F.R. § 201.1105(a), the Fund Administrator may be removed at any
time by order of the Commission or hearing officer.
36.
The Fund Administrator will be responsible for administering the Fair Fund in
accordance with the Plan. This will include, among other things, taking reasonable steps to
identify and contact Preliminary Claimants; obtaining mailing information for Preliminary
Claimants; establishing a website and staffing a call center to address inquiries during the claims
process; developing a claims database; preparing accountings; cooperating with the tax
administrator appointed by the Commission to satisfy any tax liabilities and to ensure
compliance with income tax reporting requirements, including but not limited to Foreign
Account Tax Compliance Act (FATCA); advising Preliminary Claimants, Class Action
Authorized Claimants, and Class Action Second Settlement Claimants of deficiencies in claims
and providing an opportunity to dispute the deficiency or to cure any documentary defects;
taking antifraud measures, such as identifying false, ineligible and overstated claims, including
the claims submitted in the Class Action settlement by Class Action Authorized Claimants;
making determinations under the criteria established herein as to Preliminary Claimant
eligibility; advising Preliminary Claimants, Class Action Authorized Claimants, and Class
Action Second Settlement Claimants of final claim determinations; disbursing the Fair Fund in
accordance with this Plan, as ordered by the Commission; and researching and reconciling errors
and reissuing payments, when possible.
37.
To carry out the purposes of this Plan, the Fund Administrator is authorized to
make and implement immaterial changes to the Plan upon agreement of the Commission staff. If
a change is deemed to be material by the Commission staff, Commission approval is required
prior to implementation by amending the Plan.
38.
The Fund Administrator may extend any procedural deadline contained in the
Plan for good cause shown, if agreed upon by the Commission staff.
39.
The Fund Administrator is authorized to enter into agreements with third-parties
as may be appropriate or necessary in the administration of the Fair Fund, provided such thirdparties are not Excluded Parties. In connection with such agreements, the third-parties shall be
deemed to be agents of the Fund Administrator under this Plan.
4

See Order Appointing Fund Administrator and Setting Bond Amount, Exchange Act Rel. No. 88430 (Mar. 19,
2020).

7

40.
The Fund Administrator will be entitled to payment from the Fair Fund of
reasonable fees and expenses, including the bond premium, incurred in the performance of its
duties (including any such fees and expenses incurred by agents, consultants or third-parties
retained by the Fund Administrator in furtherance of its duties).
VI.

ADMINISTRATION OF THE FAIR FUND
Identification of and Notification

41.
Based upon records obtained in its capacity as claims administrator in the Class
Action, the Fund Administrator has identified several Preliminary Claimants, including those
who opted-out of the Class Action, and those whose name and address was provided to the
Fund Administrator by nominees but who did not file a claim in the Class Action. The Fund
Administrator will, insofar as practicable, use its best efforts to identify additional Preliminary
Claimants by contacting nominees who did not respond to the previous two Class Action
settlements, and by mailing a Claims Packet to those previously identified but who did not
previously file a claim form. The Fund Administrator may also engage a third-party firm, after
consultation with and approval of the Commission staff, to assist in identifying additional
Preliminary Claimants to maximize the participation rate in this distribution.
42.
Within sixty (60) days after Commission approval of the Plan, the Fund
Administrator shall:
(a)

design and submit a Claims Packet, including the Plan Notice, the Claim
Form, and the Personalized Claim Form, to the Commission staff for
review and approval;

(b)

design and submit a Postcard Notice to the Commission staff for review
and approval;

(c)

create a mailing database of all Preliminary Claimants based upon
information identified by the Fund Administrator, and will create a claim
database consisting of Preliminary Claimants, Class Action Authorized
Claimants, and Class Action Second Settlement Claimants;

(d)

run a National Change of Address search to retrieve updated addresses for
all records in the database, thereby ensuring the mailing information for
Preliminary Claimants, Class Action Authorized Claimants, and Class
Action Second Settlement Claimants is up-to-date;

(e)

send the appropriate Claims Packet to the last known email address (if
known) and/or mailing address of each Class Action Second Settlement
Claimant and Preliminary Claimant identified by the Fund Administrator;

8

(f)

send the Postcard Notice to the last known email address (if known)
and/or mailing address of each Class Action Authorized Claimant;

(g)

send a letter to the Fund Administrator’s list of banks, brokers, and other
nominees who did not respond to the Class Action settlements, in
accordance with paragraph 46 below;

(h)

establish and maintain a website devoted solely to the Fair Fund. The Fair
Fund’s website, located at www.strategicclaims.net/secvmagnachip, will
make available a copy of the approved Plan, Plan Notice, and Postcard
Notice; provide information regarding the claims process and eligibility
requirements for participation in the Fair Fund in the form of frequently
asked questions; include in downloadable form, the Claim Form and
Personalized Claim Form; and such other information the Fund
Administrator believes will be beneficial;

(i)

establish and maintain a toll-free telephone number, 1-866-274-4004 for
anyone to call to speak to a live representative of the Fund Administrator
during its regular business hours or, outside of such hours, to hear
prerecorded information about the Fair Fund. The toll-free number will be
listed on all correspondence from the Fund Administrator as well as on the
Fair Fund’s website;

(j)

establish and maintain a traditional mailing address and an email address
which will be listed on all correspondence from the Fund Administrator to
Preliminary Claimants, Class Action Authorized Claimants, and Class
Action Second Settlement Claimants, as well as on the Fair Fund’s
website; and

(k)

publish the Summary Notice on an Internet-based newswire service with
national distribution and the Plan Notice and Claim Form with the DTC on
LENS.

43.
The Commission staff retains the right to review and approve any material posted
on the Fair Fund’s website, any material mailed, and any scripts used in connection with any
communication with Preliminary Claimants, Class Action Authorized Claimants, and Class
Action Second Settlement Claimants.
44.
In all materials that refer to the Claims Bar Date, the filing deadline will be
clearly identified with the calendar date, which is one hundred twenty (120) days from the date
of the initial mailing of the Claims Packet.
45.
The Fund Administrator will promptly provide a Claims Packet to any
Preliminary Claimant or Class Action Second Settlement Claimant upon request made via mail,
phone, or email prior to the Claims Bar Date.

9

46.
The Fund Administrator will send by mail, email, or other means, a letter to the
Fund Administrator’s list of banks, brokers, and other nominees, as well as any other institutions
identified during the outreach process that may have records of the Securities during the
Relevant Period (collectively, the “Nominees or Custodians”) who did not respond to or request
forms for the Class Action settlements. The Fund Administrator will request that these entities
who did not respond to the Class Action settlements, to the extent that they were record holders
for beneficial owners of the Securities:
(a)

within ten (10) days of the Nominees’ or Custodians’ receipt of the letter,
notify and send the Plan Notice to the respective beneficial owners, and, as
requested, provide to the beneficial owners a Claims Packet, so that the
beneficial owners may timely file a claim. The burden will be on the
Nominees or Custodians to ensure the claims process information,
including, if requested, the Claims Packet and other relevant materials, is
properly disseminated to the beneficial owners; and/or

(b)

provide to the Fund Administrator, within ten (10) days of receipt of the
letter, a list of last known names and addresses for all beneficial owners
for whom/which they purchased, as the record holder, the Securities
during the Relevant Period, so that the Fund Administrator can
communicate with the beneficial owners directly.

47.
For the Nominees or Custodians who previously responded to the Class Action
settlements and requested forms to mail themselves, they should contact the Fund Administrator
within ten (10) days of receipt of the letter to determine how many Claims Packets will be
required to mail to those who did not file a claim form in the Class Action settlements.
48.
At the discretion of the Fund Administrator, in consultation with the Commission
staff, a reasonable number of additional copies of the Claims Packet shall be made available to
any Nominee or Custodian requesting it for the purpose of distribution to beneficial owners.
49.
Documented reasonable out-of-pocket expenses incurred by the Nominees or the
Custodians, which would not have been incurred but for compliance with paragraphs 46 and 47
above, shall be reimbursed from the Fair Fund. The amount of such expenses allowed will be at
the discretion of the Fund Administrator, in consultation with the Commission staff. Unless
otherwise determined by the Fund Administrator in consultation with the Commission staff, outof-pocket expenses based on the following rates will be considered reasonable:
(a)

a maximum of $0.05 per Claims Packet, plus postage at the pre-sort
postage rate per Claim Packet actually mailed;

(b)

a maximum of $0.05 per email of Summary Notice or Plan Notice and
Claim Form link disseminated; or

(c)

$0.05 per name, address, and email address provided to the Fund
Administrator, up to a maximum of amount of $1,500.00.
10

50.
The Fund Administrator will attempt to locate any Preliminary Claimant and
Class Action Second Settlement Claimant whose mailing is returned as “undeliverable,” and will
document all such efforts. The Fund Administrator shall use its best efforts to make use of
commercially available resources and other reasonably appropriate means to obtain updated
addresses in response to “undeliverable” notices, and forward any returned mail for which an
updated address is provided or obtained. The Fund Administrator will make available, upon
request by the Commission staff, a list of all Preliminary Claimants and Class Action Second
Settlement Claimants whose Claims Packets have been returned as “undeliverable” due to
incorrect addresses and for which the Fund Administrator has been unable to locate current
addresses.
51.
The Fund Administrator, with Commission staff approval, may engage a thirdparty search firm to conduct more rigorous searches for any Preliminary Claimant whose Claims
Packet is returned as undeliverable. Additional efforts to identify new addresses for returned
undeliverable mail will be conducted as necessary and economically reasonable after
consultation with the Commission staff.
Filing a Claim
To avoid being barred from asserting a claim, the following must be postmarked
or submitted electronically to the Fund Administrator on or before the Claims Bar Date: (a) the
Class Action Second Settlement Claimant’s Personalized Claim Form and all required
supporting documentation for investments in the Securities between March 12, 2014 and
February 12, 2015, as described in his, her, or its Plan Notice; or (b) the Preliminary Claimant’s
properly completed Claim Form and all required supporting documentation, as described in his,
her, or its Plan Notice. Without limitation, this information may include third-party documentary
evidence of purchases and dispositions of Securities during the Relevant Period, as well as
holdings of Securities at pertinent dates.
52.

The burden will be upon the Preliminary Claimant or Class Action Second
Settlement Claimant to ensure that his, her, or its Claim Form or Personalized Claim Form has
been properly and timely received by the Fund Administrator. A Claim Form or Personalized
Claim Form that is postmarked after the Claims Bar Date will not be accepted unless the
deadline is extended by the Fund Administrator for good cause shown, after consultation with
the Commission staff.
53.

54.
All Claim Forms, Personalized Claim Forms, and supporting documentation
necessary to determine a Preliminary Claimant’s or Class Action Second Settlement Claimant’s
eligibility to receive a distribution from the Fair Fund under the terms of the Plan must be
verified by a declaration executed by the Preliminary Claimant or Class Action Second
Settlement Claimant under penalty of perjury under the laws of the United States. The
declaration must be executed by the Preliminary Claimant or Class Action Second Settlement
Claimant, unless the Fund Administrator accepts such declaration from a Person authorized to
act on the Preliminary Claimant’s or Class Action Second Settlement Claimant’s behalf, whose
authority is supported by such documentary evidence as the Fund Administrator deems
necessary.
11

55.
Electronic claims submission is encouraged; the Plan Notice will include
directions on how Preliminary Claimants and Class Action Second Settlement Claimants can
submit the required documentation electronically via the Fair Fund’s website. If using the webbased claim filing option, a Preliminary Claimant or Class Action Second Settlement Claimant
must submit his, her, or its required documentation to the Fund Administrator by 11:59 p.m. on
the Claims Bar Date. The Plan Notice will also include directions for submission of claims if the
Preliminary Claimant or Class Action Second Settlement Claimant is unable to submit his, her,
or its claim electronically.
56.
When submitting claims to the Fair Fund on behalf of its clients, all Third-Party
Filers must use the electronic filing template provided by the Fund Administrator in this matter.
Claims submitted by Third-Party Filers that do not comply with the template and format
provided by the Fund Administrator may be rejected. Third-Party Filers must also submit a
signed master proof of claim and release, as well as proof of authority to file on behalf of the
claimant(s) at the time the electronic file of transactions is submitted. Failure to do so may result
in rejection of the claim.
57.
Each Third-Party Filer must establish the validity and amount of each claim in its
submission. Third-Party Filers must submit such supporting documentary evidence of
purchases, dispositions, and holdings of Securities as the Fund Administrator deems necessary or
appropriate to substantiate each individual claim. Without limitation, this includes the complete
name of the Preliminary Claimant (beneficial account owner) or Class Action Second Settlement
Claimant, and his, her, or its TIN (for individuals) or EIN (for companies), sufficient contact
information to confirm the identity of the beneficial owner, and documentation from the original
bank, broker, or other institution of purchases and dispositions of Securities (account statements,
confirmations and other documentation of purchases and dispositions), as well as holdings of the
Securities on pertinent dates. Documentation generated by the Third-Party Filer and affidavits in
lieu of supporting documentation will not be accepted. The Fund Administrator will have the
right to request, and the Third-Party Filer will have the burden of providing to the Fund
Administrator, any additional information and/or documentation deemed necessary by the Fund
Administrator to substantiate the claim(s) contained in the submission. Documentation from a
Third-Party Filer that is not acceptable to the Fund Administrator will result in rejection of the
affected claim(s). The determination of the Fund Administrator to reject a claim for insufficient
documentation, as reflected on the Final Determination Notice, is final and within the discretion
of the Fund Administrator.
58.
The receipt of Securities by gift, inheritance, devise, or operation of law will not
be deemed to be a purchase of Securities, nor will it be deemed an assignment of any claim
relating to the purchase of such Securities unless specifically so provided in the instrument of
inheritance. However, the recipient of Securities as a gift, inheritance, devise or by operation of
law will be eligible to file a Claim Form or Personalized Claim Form and participate in the
distribution of the Fair Fund to the extent the original purchaser would have been eligible under
the terms of the Plan. Only one claim may be submitted with regard to the same transactions in
Securities, and in cases where multiple claims are filed by the donor and donee, only the donee
claim will be honored, assuming it is supported by proper documentation.
12

59.
Claims on behalf of a retirement plan covered by Section 3(3) of ERISA, 29
U.S.C.§ 1002(3), which do not include Individual Retirement Accounts and such plan’s
participants, are properly made by the administrator, custodian or fiduciary of the plan and not
by the plan’s participants. The Fund Administrator will distribute any payments on such claims
directly to the administrator, custodian or fiduciary of the retirement plan. The custodian or
fiduciary of the retirement plan will distribute any payments received in a manner consistent with
its fiduciary duties and the governing account or plan provisions.
60.
The Preliminary Claimant, Class Action Authorized Claimant, and Class Action
Second Settlement Claimant has the burden of notifying the Fund Administrator of a change in
his, her, or its current address and other contact information, and of ensuring that such
information is properly reflected on the Fund Administrator’s records.
Claims Eligibility Determination
61.
The Fund Administrator will review all claim submissions and determine the
eligibility of each Preliminary Claimant and Class Action Second Settlement Claimant to
participate in the Fair Fund by reviewing claim data and supporting documentation (or the lack
thereof) and verifying the claim. Any Preliminary Claimant or Class Action Second Settlement
Claimant with a valid claim who held the Security during the Relevant Period and who is not an
Excluded Party will be deemed an Eligible Claimant. Each Preliminary Claimant and Class
Action Second Settlement Claimant will have the burden of proof to establish the validity and
amount of his, her, or its claim, and qualification as an Eligible Claimant. The Fund
Administrator will have the right to request, and the Preliminary Claimant or Class Action
Second Settlement Claimant will have the burden of providing to the Fund Administrator, any
additional information and/or documentation deemed relevant by the Fund Administrator. Class
Action Authorized Claimants are automatically deemed Eligible Claimants, provided that there is
no indicia of fraud in the claim that he, she, or it submitted in the Class Action settlement.
62.
The Fund Administrator will provide a Claim Status Notice within ninety (90)
days of the Claims Bar Date to each Preliminary Claimant or Class Action Second Settlement
Claimant who has filed a Claim Form or Personalized Claim Form, or who has otherwise
responded to his, her, or its Plan Notice with the Fund Administrator, and to any Class Action
Authorize Claimant whose claim is identified as potentially fraudulent, setting forth the Fund
Administrator’s determination of the eligibility of the claim (eligible, partially or wholly
deficient, or ineligible). The Claim Status Notice will provide to each Preliminary Claimant or
Class Action Second Settlement Claimant whose claim is deficient, in whole or in part, the
reason(s) for the deficiency (e.g., failure to provide required information or documentation). In
the event the claim is denied, in whole or in part, the Claim Status Notice will state the reason(s)
for such denial. The Claim Status Notice will provide to each Class Action Authorized Claimant
whose claim is identified as potentially fraudulent the reason(s) that it was so identified. The
Claim Status Notice will also notify the Preliminary Claimant, Class Action Second Settlement
Claimant, or Class Action Authorized Claimant of the opportunity to cure any deficiency or
dispute the determination made by the Fund Administrator, and will provide instructions
regarding what is required to do so.
13

63.
Any Preliminary Claimant or Class Action Second Settlement Claimant with a
deficient claim will have thirty (30) days from the date of the Claim Status Notice to cure any
deficiencies identified in the Claim Status Notice.
64.
Any Preliminary Claimant or Class Action Second Settlement Claimant disputing
a denied claim must submit a written request for reconsideration to the Fund Administrator
within thirty (30) days of the date of the Claim Status Notice. All requests for reconsideration
must include the necessary documentation to substantiate the basis upon which the Preliminary
Claimant or Class Action Second Settlement Claimant is requesting reconsideration of his, her,
or its claim.
65.
Any Class Action Authorized Claimant whose claim is identified as potentially
fraudulent will have thirty (30) days from the date of the Claim Status Notice to dispute the
determination and/or provide documentation demonstrating the validity of the claim.
66.
The Fund Administrator may, in its sole discretion, consider disputes of any
nature presented in writing within thirty (30) days of the Claim Status Notice, and will consult
Commission staff as appropriate.
67.
The Fund Administrator will send a Final Determination Notice to any claimant
who responds to the Claim Status Notice in an effort to cure a deficiency or dispute the
determination made by the Fund Administrator, notifying the claimant of its determination. The
Fund Administrator will send such Final Determination Notices no later than thirty (30) days
following receipt of documentation or information in response to the Claim Status Notice, or
such longer time as the Fund Administrator determines is necessary for a proper determination
concerning the claim.

68.
The Fund Administrator will have the authority, in its sole discretion, to waive
technical claim deficiencies and approve claims on a case-by-case basis, or in groups of claims.
All determinations made by the Fund Administrator in accordance with the Plan in any dispute
or request to cure a deficient claim will be final and not subject to appeal.
Distribution Methodology
69.
The Fund Administrator will calculate each Eligible Claimant’s Recognized Loss
in accordance with the Plan of Allocation. All Eligible Claimants who are determined to receive
a Distribution Payment will be deemed a Payee.
Establishment of a Reserve
70.
Before determining the amount of funds available for distribution and calculating
each Payee’s Distribution Payment, the Fund Administrator, in conjunction with the Tax
Administrator, will establish a reserve to pay Administrative Costs and to accommodate any
unexpected expenditures (the “Reserve”).

14

71.
After all disbursements and Administrative Costs are paid, any remaining
amounts in the Reserve will become part of the Residual described in paragraph 94 below.
Preparation of the Payment File
72.
Within forty-five (45) days following the date of the Final Determination Notices
described in paragraph 67 above, the Fund Administrator will compile and send to the
Commission staff the Payee information, including the name, address, calculated Recognized
Loss, and the amount of the Distribution Payment for all Payees (the “Payee List”). The Fund
Administrator will also provide a Reasonable Assurances Letter to the Commission staff,
representing that the Payee List: (a) was compiled in accordance with the approved Plan; (b) is
accurate as to Payees’ names, addresses, Recognized Losses and amounts of their Distribution
Payment; (c) includes the number of Payees compensated; (d) includes the percentage of the
Payee’s Recognized Loss being compensated by the disbursement from the Fair Fund, and if
applicable, the total percentage to include all prior disbursements; (e) includes the total amount
being distributed; and (f) provides all information necessary to make a payment to each Payee.
The Escrow Account
73.
Prior to the disbursement of the Net Available Fair Fund, the Fund Administrator
will establish an escrow account (the “Escrow Account”) with a United States commercial bank
that is a well-capitalized financial institution as defined by the Federal Reserve Act, Subpart D,
12 C.F.R. 208.43 and that is not unacceptable to the Commission staff (the “Bank”), pursuant to
an escrow agreement (the “Escrow Agreement”) to be provided by Commission staff.
74.
The Fund Administrator, pursuant to the Escrow Agreement, shall also establish
with the Bank a separate deposit account (e.g. controlled distribution account, managed
distribution account, linked checking and investment account) (the “Distribution Account”),
insured by the Federal Deposit Insurance Corporation (“FDIC”) up to the guaranteed FDIC pass
through limit. The Distribution Account shall be linked with the Escrow Account and shall be
named, and records maintained, in accordance with the Escrow Agreement.
75. During the term of the Escrow Agreement, the portions of the Fair Fund transferred
to the Escrow Account (the “Escrow Property”), shall be invested and reinvested in short-term
U.S. Treasury securities backed by the full faith and credit of the United States Government or
an agency thereof. The investment shall be of a type and term necessary to meet the cash
liquidity requirements for payments to Payees, tax obligations, and/or fees of the Tax
Administrator and/or Fund Administrator, including investment or reinvestment in a bank
account insured by the FDIC up to the guaranteed FDIC limit, or in money market mutual funds
registered under the Investment Company Act of 1940 that invest 100% of their assets in direct
obligations of the United States Government.
76. The Fund Administrator shall provide duplicate original bank and/or investment
statements on any accounts established by the Fund Administrator to the Tax Administrator on a
monthly basis and shall assist the Tax Administrator in obtaining mid-cycle statements, as
necessary.
15

77. The Fund Administrator shall deposit or invest funds in the Escrow and
Distribution Accounts so as to result in the maximum reasonable net return, taking into account
the safety of such deposits or investments. In consultation with Commission staff, the Fund
Administrator shall work with the Bank on an ongoing basis to determine an allocation of funds
between the Escrow and Distribution Account.
78. All interest, dividends, and/or income earned by the Escrow Property will accrue
for the benefit of the Escrow Property. All Administrative Cost associated with the Escrow and
Distribution Accounts will be the responsibility of the Fund Administrator, who may be
reimbursed for said costs as provided in this Plan. No such Administrative Costs may be paid to
the Bank, its agents, and/or its affiliates from the Escrow Property.
Distribution of the Fair Fund
79.
The Fund Administrator will seek to distribute the Net Available Fair Fund to all
Payees only after all claims have been processed and all claimants whose claims have been
rejected or disallowed, in whole or in part, have been notified and provided the opportunity to
contest or cure pursuant to the procedures set forth herein.
80. Upon the Commission staff’s receipt, review, and acceptance of the Payee List and
Reasonable Assurances Letter from the Fund Administrator, the Commission staff will seek an
Order from the Commission pursuant to Rule 1101(b)(6) of the Commission’s Rules, 17 C.F.R.
§ 210.1101(b)(6), to disburse funds to the Bank in accordance with the Payee List for
distribution by the Fund Administrator in accordance with the Plan. All disbursements will be
made pursuant to a Commission Order.
81. Upon issuance of an Order to disburse, the Commission staff will direct the transfer
of funds in accordance with the Payee List to the Bank. The Fund Administrator will then use its
best efforts to commence mailing Distribution Payment checks and/or effect wire transfers
within ten (10) business days of the release of the funds into the Distribution Account. All
efforts will be coordinated to limit the time between the Distribution Account’s receipt of the
funds and the issuance of Distribution Payments.
82.
All Distribution Payments will be issued by the Fund Administrator from the
Distribution Account. All checks will bear a stale date of one hundred twenty (120) days from
the date of issuance. Checks that are not negotiated by the stale date will be voided, and the
Bank will be instructed to stop payment on those checks. A Payee’s claim will be extinguished
if he, she, or it fails to negotiate his, her, or its check by the stale date, and the funds will remain
in the Fair Fund, except as provided in paragraph 90.
83.
All payments will be preceded or accompanied by a communication that includes,
as appropriate: (a) a statement characterizing the distribution; (b) a statement that the tax
treatment of the distribution is the responsibility of each Payee and that the Payee should consult
his, her, or its tax advisor for advice regarding the tax treatment of the distribution; (c) a
statement that checks will be void and cannot be reissued after one hundred twenty (120) days
from the date the original check was issued; and (d) contact information for the Fund
16

Administrator for questions regarding the Distribution Payment. The letter or other mailings to
Payees characterizing a Distribution Payment will be submitted to the Tax Administrator and
Commission staff for review and approval.
84.
All Distribution Payments, either on their face or in the accompanying mailing,
will clearly indicate that the money is being distributed from the Fair Fund established by the
Commission to compensate investors for harm as a result of securities law violations.
85.
Distribution Payments must be made by check or electronic payment payable to
the Payee (the beneficial account owner). A Third-Party Filer shall not be the payee of any
Distribution Payment check or electronic Distribution Payment. Any other payment arrangement
must be discussed with the Fund Administrator in consultation with the Commission staff and
must be authorized by the Payee. Compensation to a Third-Party Filer for its services may not
be paid or deducted from the Distribution Payment.
86.
If, after discussion with the Fund Administrator in consultation with the
Commission staff, and authorization by the Payee(s), a Distribution Payment is to be made to a
Third-Party Filer to distribute to the Payee(s), the Third-Party Filer will be required to complete
a certification, which will require it, at a minimum, to attest that any distribution to the custodian,
trustee, or investment professional representing multiple potentially eligible beneficial owners,
will be allocated for the benefit of current or former pooled investors and not for the benefit of
management. All such Third-Party Filers must have an auditable mechanism available to the
Fund Administrator and the Commission staff to confirm that each Payee received the
Distribution Payment directed to him, her, or it.
87.
The submission of a Claim Form or a Personalized Claim Form, as applicable,
and the receipt and acceptance of a Distribution Payment by a Payee is not intended to be a
release of a Payee’s rights and claims against any party.
88.
Electronic or wire transfers may be utilized at the discretion of the Fund
Administrator to transfer approved Distribution Payments to filers of claims on behalf of twenty
(20) or more Payees. Wire transfers will be initiated by the Fund Administrator using a twoparty check and balance system, whereby completion of a wire transfer will require an
authorization by two members of the Fund Administrator’s senior staff.
Post Distribution; Handling of Returned or Uncashed Checks; and Reissues
89.
The Fund Administrator shall use its best efforts to make use of commercially
available resources and other reasonably appropriate means to locate all Payees whose checks
are returned to the Fund Administrator as “undeliverable.” If new address information becomes
available, the Fund Administrator will repackage the distribution check and send it to the new
address. If new address information is not available after a diligent search (and in no event no
later than one hundred twenty (120) days after the initial mailing of the original check), or if the
distribution check is returned again, the check shall be voided and the Fund Administrator shall
instruct the issuing financial institution to stop payment on such check. If the Fund
Administrator is unable to find a Payee’s correct address, the Fund Administrator, in its
17

discretion, may remove such Payee from the distribution and the allocated Distribution Payment
will remain in the Fair Fund for distribution, if feasible, to the remaining Payees.
90.
The Fund Administrator will reissue checks to Payees upon the receipt of a valid,
written request from the Payee prior to the initial stale date. In cases where a Payee is unable to
endorse a Distribution Payment check as written (e.g., name changes, IRA custodian changes, or
recipient is deceased) and the Payee or a lawful representative requests the reissuance of a
Distribution Payment check in a different name, the Fund Administrator will request, and must
receive, documentation to support the requested change. The Fund Administrator will review the
documentation to determine the authenticity and propriety of the change request. If, in the
discretion of the Fund Administrator, such change request is properly documented, the Fund
Administrator will issue an appropriately redrawn Distribution Payment to the requesting party.
Reissued checks will be void at the later of one hundred twenty (120) days from issuance of the
original check or ninety (90) days from the reissuance, and in no event will a check be reissued
after one hundred twenty (120) days from the date of the original issuance without the approval
of Commission staff.
91.
The Fund Administrator will make reasonable efforts to contact Payees who have
failed to negotiate their Distribution Payment check and take appropriate action to follow up on
the status of uncashed checks at the request of Commission staff. The Fund Administrator may
reissue such checks subject to the time limits detailed herein.
Administrative Costs
92.
All Administrative Costs will be paid from the Fair Fund in accordance with the
Commission’s Rules.
Disposition of Undistributed Funds
93.
If funds remain following the initial distribution and payment of all
Administrative Costs, the Fund Administrator, in consultation with the Commission staff, may
seek subsequent distribution of any available remaining funds, pursuant to the Commission’s
Rules.
94.
A residual within the Fair Fund will be established for any amounts remaining
after the final disbursement to Payees from the Fair Fund (the “Residual”). The Residual may
include funds from, among other things, amounts remaining the Reserve, distribution checks that
have not been cashed, checks or electronic payments that were not delivered or returned to the
Commission, tax refunds for overpayment or for waiver of IRS penalties.
95.
All funds remaining in the Residual that are infeasible to distribute to investors
will be returned to the Commission, and will be transferred to the U.S. Treasury after the final
accounting is approved by the Commission.

18

Filing of Reports and Accountings
96.
In accordance with Rule 1105(f) of the Commission’s Rules, the Fund
Administrator shall provide to the Commission staff a progress report and a quarterly account
statement in a format to be provided by Commission staff, within forty-five (45) days of the
Commission’s approval of the Plan, and shall provide to Commission staff additional reports and
quarterly account statements within ten (10) days after the end of every calendar quarter. Such
progress reports shall inform the Commission staff of the activities and status of the Fair Fund
during the reporting period, and shall specify, at a minimum, the location of the account(s)
comprising the Fair Fund, including among other things, an interim accounting of all monies in
the Fair Fund.
97.
When the final distribution is completed, the Fund Administrator shall provide to
Commission staff a final report summarizing all tasks undertaken and the outcome of its
administrative efforts. The Fund Administrator shall make arrangement for the final payment of
all Administrative Costs, and submit a final accounting of all monies received, earned, spent, and
distributed in connection with the administration of the Plan in a format provided by the
Commission staff. The Fund Administrator will also submit a report to the Commission staff
containing the final distribution statistics regarding distributions to individuals and entities, and
such other information requested by the Commission staff.
Termination of the Fair Fund
98.
The Fair Fund will be eligible for termination and the Fund Administrator will be
eligible for discharge after all of the following have occurred (a) a final accounting in a standard
accounting format provided by the Commission staff has been submitted by the Fund
Administrator and approved by the Commission; (b) all Administrative Costs have been paid;
and (c) any amount remaining in the Fair Fund has been returned to the Commission for transfer
to U.S. Treasury. Once the Commission has approved the final accounting, the Commission
staff will seek an order from the Commission authorizing: (a) the transfer of any amounts
remaining in the Fair Fund that are infeasible to return to investors, and any amounts returned to
the Fair Fund in the future that are infeasible to return to investors, to the U.S. Treasury, subject
to Section 21F(g)(3) of the Exchange Act; (b) discharge of the Fund Administrator;
(c) cancellation of the Fund Administrator’s bond; and (d) termination of the Fair Fund.
99.
Once the Fair Fund has been terminated and funds, if any, are transferred to the
U.S. Treasury, no further claims will be allowed and no additional payments will be made
whatsoever.
Miscellaneous
100. When administering this Plan, the Fund Administrator, and/or each of its
designees, agents and assigns, may rely on: all applicable law; orders issued by the Commission,
including orders issued by delegated authority; orders issued by an administrative law judge, if
any, appointed in this proceeding; and any records, including records containing investor
information, provided by Commission staff.
19

101. Should any additional funds be received pursuant to Commission or Court order,
agreement, or otherwise, prior to the Commission’s termination of the Fair Fund, such funds will
be added to the Fair Fund and distributed, if feasible, in accordance with the Plan, pursuant to the
Commission’s Rules.
Wind-down and Document Retention
102. The Fund Administrator will shut down the website, P.O. Box and customer
service telephone line(s) established specifically for the administration of the Fair Fund six (6)
months after the transfer of any remaining funds to the Commission, or at such earlier time as the
Fund Administrator determines with the concurrence of the Commission staff.
103. The Fund Administrator will retain all materials submitted by Preliminary
Claimants and Class Action Second Settlement Claimants in either paper or electronic form for a
period of six (6) years from the date of approval of a final fund accounting. Materials
maintained in electronic form must be accessible and readable for the duration of retention.
Pursuant to the Commission staff’s direction, the Fund Administrator will either turn over to the
Commission or destroy all materials, including documents in any media, upon expiration of this
period.
VII.

NOTICE AND COMMENT PERIOD

104. The Notice of Proposed Plan of Distribution and Opportunity to Comment (the
“Notice”) will be published on the Commission’s website at
“http://www.sec.gov/litigation/fairfundlist.htm”. Any Person wishing to comment on the Plan
must do so in writing by submitting their comments to the Commission within thirty (30) days of
the publication of the Notice: (a) to the Office of the Secretary, United States Securities and
Exchange Commission, 100 F Street, NE, Washington, DC 20549-1090; (b) by using the
Commission’s Internet comment form (http://www.sec.gov/litigation/admin.shtml); or (c) by
sending an email to rule-comments@sec.gov. Comments submitted by email or via the
Commission’s website should include “Administrative Proceeding File Number 3-17956” in the
subject line. Comments received will be available to the public. Persons should only submit
comments that they wish to make publicly available.

20

Exhibit A
PLAN OF ALLOCATION
This Plan of Allocation is designed to compensate investors based on their losses on
MagnaChip common stock listed on a U.S. exchange and registered with the Commission and
traded under the symbol MX (the “Securities”) between February 1, 2012 and February 12, 2015,
inclusive (the “Relevant Period”) due to the misconduct of the Respondents. Investors who did not
purchase shares of the Securities during the Relevant Period did not purchase shares at prices
inflated by the Respondents’ violative conduct or who are an Excluded Party1 are ineligible to
recover under this Plan.
The Respondents made multiple corrective disclosures during the Relevant Period. The
periods between successive corrective disclosures during the Relevant Period are identified as
“Inflation Periods,” and the extent to which the Securities price was inflated (“Per-Share Inflation”)
is consistent through the duration of an Inflation Period. In order for the Securities purchased
during the Relevant Period to have suffered a loss, the shares must have been held at the time when
Respondents issued a corrective disclosure and the price of the Securities declined concomitantly.
Artificial inflation in the price of the Securities over various date ranges surrounding
corrective disclosures and average closing prices of the Securities during the Lookback Period
(defined below) have been calculated by Commission’s staff economists and are reflected in Table
A and Table B, respectively.
The Fund Administrator will calculate the amount of loss for each share of the Securities
purchased or acquired during the Relevant Period (“Recognized Loss per Share”) as follows:
For each share of the Securities that was:
i.

Sold prior to January 28, 2014, the Recognized Loss per Share shall be $0.00.

ii.

Sold during the period January 28, 2014 through February 12, 2015, inclusive,
the Recognized Loss per Share shall be the lesser of:

iii.

1

(a)

the inflation on the purchase/acquisition date as appears in Table A
below, minus the amount of inflation on the sale date as appears in
Table A;2 or

(b)

the purchase/acquisition price minus the sale price.

Sold during the period February 13, 2015 through May 13, 2015, inclusive (the
Lookback Period), the Recognized Loss per Share shall be the least of:

All capitalized terms used herein but not defined shall have the same meanings ascribed to them in the Plan.
If the price inflation reflected in Table A exceeds the purchase price, then the price inflation shall be equal to the
purchase price. A share purchased during an Inflation Period and sold during the same Inflation Period as the purchase
shall have a Recognized Loss of $0.00.
2

iv.

(a)

the inflation on the purchase/acquisition date as appears in Table A
below;

(b)

the purchase/acquisition price minus the sale price; or

(c)

the purchase/acquisition price minus the “Lookback Value” on the
sale date as appears in Table B below.

Held as of the close of trading on May 13, 2015 (the last day of the Lookback
Period), the Recognized Loss per Share shall be the lesser of:
(a)

the inflation on the purchase/acquisition date as appears in Table A
below; or

(b)

the purchase/acquisition price minus $5.60, the average closing price
of the Securities during the Lookback Period, as appears in the last
row of Table B.

In all instances, a share of Securities purchased during the Relevant Period and sold during
the Relevant Period or the Lookback Period, where the sale price is greater than or equal to the
purchase price, reflecting a gain, shall have a Recognized Loss per Share of $0.00.
Example Calculations: A share of the Securities purchased on July 25, 2014 for $14.04,
would have a Recognized Loss per Share of


$0.00 if it were sold on August 6, 2014 (within the same Inflation Period);



$0.00 if it were sold at $14.30 (for a gain);



$0.91 if it were sold on December 18, 2014 for $12.99 (the difference in inflation from
Tables A, $0.91= $8.43 – $7.52, being smaller than the difference in prices, $1.05=
14.04 – $12.99); and



$8.43 if it were held through the close of trading on May 13, 2015 (the inflation at the
purchase from Table A, $8.43, being smaller than the purchase price less the Lookback
Period holding value, $8.44= $14.04 – $5.60).

All prices mentioned in the calculations exclude all fees and commissions. Purchases,
acquisitions and sales shall be deemed to have occurred on the “contract” or “trade” date as
opposed to the “settlement” or “payment” date. Any transactions executed outside of regular
trading hours for the U.S. financial markets shall be deemed to have occurred during the next
regular trading session.

2

Additional Provisions
FIFO Methodology: Transactions for an Eligible Claimant who made multiple
purchases/acquisitions and sales of Security during the Relevant Period, will be matched according
to the first-in, first-out (“FIFO”) method. The earliest sales during the Relevant Period will be
matched first against any holdings at the opening of the Relevant Period. Once the beginning
holdings have all been matched, or in the event there are no beginning holdings, then any further
sales will be matched against the earliest Relevant Period purchases/acquisitions and
chronologically thereafter.
Acquisitions: The receipt or grant of the Securities to the Eligible Claimant by gift, devise,
inheritance, or operation of law during the Relevant Period is not considered an eligible purchase if
the original purchase did not occur during the Relevant Period. Shares acquired outside of the
Relevant Period will be excluded from the calculation of the Recognized Loss per Share.
Options and Derivatives: MagnaChip common stock is the only security eligible for
recovery under this Plan. Option contracts to purchase or sell the Securities are not securities
eligible for recovery under the Plan. With respect to the Securities purchased or sold through the
exercise of an option, the purchase/sale date is the exercise date of the call and the assignment date
of the put. The purchase/sale price is the strike price of the call at the time of exercise and the
strike price of the put at the time of assignment. Transactions in the Securities during the Relevant
Period that are pursuant to, or in connection with, a swap or another derivative will not be eligible
for a recovery and shall be excluded from the Recognized Loss per Share calculation.
Short Sales: If the sale date for a share falls before the purchase date, then the share has a
Recognized Loss per Share of $0.00. The date of covering a short sale is deemed to be the date of
purchase of the Securities and the date of a short sale is deemed to be the date of sale of the
Securities. The earliest Relevant Period purchases shall be matched against any short position
existing on the date prior to the start of the Relevant Period, and not be entitled to a recovery until
that short position is fully covered.
Recognized Loss: An Eligible Claimant’s Recognized Loss will be the sum of the
Recognized Loss per Share, as calculated above, on all shares of the Securities purchased or
acquired during the Relevant Period. If the Recognized Loss calculates to a gain, then the
Recognized Loss will be $0.00.
Allocation of Funds: If the Net Available Fair Fund is equal to or exceeds the sum of
Recognized Losses of all Eligible Claimants, each Eligible Claimant’s distribution amount will
equal his, her, or its Recognized Loss, plus “Reasonable Interest” if applicable. If the Net
Available Fair Fund is less than the sum of the Recognized Losses of all Eligible Claimants, each
Eligible Claimant’s distribution amount will equal his, her, or its “Pro Rata Share” of the Net
Available Fair Fund (and no Reasonable Interest). In either case, the distribution amount will be
subject to the “Minimum Distribution Amount.”
Reasonable Interest: If the Net Available Fair Fund exceeds that necessary to pay all
Eligible Claimants their Recognized Losses in full, the Fund Administrator, in consultation with the
Commission staff, may include interest in the distribution amount to compensate for the time value
3

of money on Recognized Losses. Reasonable Interest will be calculated using the Short-term
Applicable Federal Rate plus three percent (3%), compounded quarterly from the end of the
Relevant Period through the approximate date of the disbursement of the funds. If there are
insufficient funds to pay Reasonable Interest in full to all Eligible Claimants, Reasonable Interest
will awarded on a pro-rata basis from the excess funds.
Pro Rata Share: A Pro Rata Share computation is intended to measure Eligible Claimants’
Recognized Losses against one another. The Fund Administrator shall determine each Eligible
Claimant’s Pro Rata Share as the ratio of his, her, or its Recognized Loss to the sum of Recognized
Losses of all Eligible Claimants.
Minimum Distribution Amount: The Minimum Distribution Amount will be $10.00. If an
Eligible Claimant’s distribution amount is less than the Minimum Distribution Amount, that
Eligible Claimant will be deemed ineligible to receive a Distribution Payment and his, her, or its
distribution amount will be reallocated on a pro-rata basis to Eligible Claimants whose distribution
amounts are greater than or equal to the Minimum Distribution Amount.
Payee: An Eligible Claimant whose distribution amount (inclusive of Reasonable Interest, if
any) equals or exceeds the Minimum Distribution Amount will be deemed a Payee and receive a
Distribution Payment equal to his, her, or its distribution amount.
Prior Recovery: To avoid payment of a windfall, the Distribution Payment will be no larger
than the Payee’s Recognized Loss minus the amount of any compensation for the loss that resulted
from the conduct described in the Order that was received from another source (e.g., class action
settlement), to the extent known by the Fund Administrator. Reasonable Interest, if awarded, may
be added to such Distribution Payment.

4

Table A: Inflation Schedule
Inflation Period
Beginning Date
1
February 1, 2012
2
January 28, 2014
3
March 12, 2014
4
March 31, 2014
5
May 21, 2014
6
August 13, 2014
7
November 13, 2014
8
February 13, 2015

Ending Date
January 27, 2014
March 11, 2014
March 30, 2014
May 20, 2014
August 12, 2014
November 12, 2014
February 12, 2015
Thereafter

Per-Share Inflation
$11.71
$10.22
$9.70
$8.97
$8.43
$7.83
$7.52
$0.00

Table B: Moving Average Closing Price during Lookback Period
Moving
Moving
Average
Average
Closing Price
Closing Price
from
from
Sale /
February 13,
Sale /
February 13,
Sale /
Disposition
2015 to Date
Disposition
2015 to Date
Disposition
Date
Shown
Date
Shown
Date
2/13/2015
$7.52
3/17/2015
$5.74
4/16/2015
2/17/2015
$7.20
3/18/2015
$5.72
4/17/2015
2/18/2015
$7.01
3/19/2015
$5.71
4/20/2015
2/19/2015
$6.82
3/20/2015
$5.70
4/21/2015
2/20/2015
$6.63
3/23/2015
$5.70
4/22/2015
2/23/2015
$6.47
3/24/2015
$5.70
4/23/2015
2/24/2015
$6.33
3/25/2015
$5.69
4/24/2015
2/25/2015
$6.30
3/26/2015
$5.68
4/27/2015
2/26/2015
$6.24
3/27/2015
$5.67
4/28/2015
2/27/2015
$6.18
3/30/2015
$5.67
4/29/2015
3/2/2015
$6.15
3/31/2015
$5.66
4/30/2015
3/3/2015
$6.11
4/1/2015
$5.66
5/1/2015
3/4/2015
$6.07
4/2/2015
$5.66
5/4/2015
3/5/2015
$6.02
4/6/2015
$5.66
5/5/2015
3/6/2015
$5.97
4/7/2015
$5.66
5/6/2015
3/9/2015
$5.92
4/8/2015
$5.66
5/7/2015
3/10/2015
$5.88
4/9/2015
$5.66
5/8/2015
3/11/2015
$5.86
4/10/2015
$5.65
5/11/2015
3/12/2015
$5.83
4/13/2015
$5.65
5/12/2015
3/13/2015
$5.80
4/14/2015
$5.64
5/13/2015
3/16/2015
$5.77
4/15/2015
$5.64

5

Moving
Average
Closing Price
from
February 13,
2015 to Date
Shown
$5.64
$5.64
$5.64
$5.64
$5.64
$5.64
$5.64
$5.64
$5.64
$5.63
$5.63
$5.63
$5.62
$5.61
$5.60
$5.60
$5.59
$5.59
$5.59
$5.60

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Asec%3A1b4f2d5ef31bbb49. Public record. Not legal advice.