a purchase for his mother or father, he would not normally go into
specifics of the proposed purchase but would just tell them that he
thought it was a good thing to do. However, Cheng treated his
younger brother differently. In particular, he said:
I could have told him — again, I don’t recall any specifics, but I could have
— he would be the one that I could have told him, hey, I’ve heard rumours
that Masonite is in play. I looked at the chart, I did this and that, I think
there’s not much downside risk here. So weighing all the pros and cons,
I think it is a good investment.
 Cheng’s evidence that he might have told his younger
brother “there’s not much downside risk here” is consistent with
an e-mail that he sent on December 8, 2004 to a person he had
recently met in Chicago. In that e-mail, advising about the
Masonite information, he said, “I don’t see much downside from
here even if the deal ended up falling through”. That statement
hardly constitutes a ringing endorsement of the reliability of the
 The Panel found that Cheng did not engage in due diligence and undertook no research with respect to the Masonite
transaction. That is not correct. I have set out above the steps
that Cheng said it would have been his practice to take, including looking at the news wire and speaking to others about
 The Panel also found that, based solely on the Masonite
information, Cheng “precipitously bought a large position for
himself and family members”. It is not clear on what basis the
Panel concluded that the purchases were precipitous. Further,
as I earlier noted, Cheng did not buy any Masonite shares for
himself. In terms of the family members, while it is true that
large positions were taken in some of those accounts, it is also
true that the dollar value of those positions was small.
 Moreover, Sherry Brown, the respondent’s lead investi-
gator, acknowledged that this was not unusual behaviour, upon
looking at the history of these accounts. With respect to one
account, Ms. Brown said:
Q. So, again, in this account, the concentrated position of Masonite is not
uncharacteristic of the trading pattern in this account.
A. It happens on other occasions, yes.
With respect to the account for Cheng’s aunt, Ms. Brown said:
Q. Again, to close off, the trading of Masonite in this account is not
uncharacteristic of the overall trading pattern in this account?
A. Concentration of it, yes, that’s correct.