Gebhart

MEMORANDUM *

Alvin Gebhart and Donna Gebhart (“the Gebharts”) bring this petition for review of a Securities and Exchange Commission (“SEC”) order imposing sanctions against them for fraudulently offering securities in violation of Section 10(b) of the Securities and Exchange Act of 1934, SEC Rule 10b-5 and NASD Conduct Rule 2120. See 15 U.S.C. § 78j; 17 C.F.R. § 240 .10b-5. We have jurisdiction pursuant to 15 U.S.C. § 78y(a)(l). We reverse in part, affirm in part and remand.

The Gebharts contend that the SEC erred in determining that they acted with scienter. We review the SEC’s factual findings for substantial evidence. 15 U.S.C. § 78y(a)(4). We set aside the SEC’s conclusions of law if they are “ ‘arbitrary, capricious, or otherwise not in accordance with law.’” Ponce v. SEC, 345 F.3d 722, 728 (9th Cir.2003) (quoting Rutherford v. SEC, 842 F.2d 214, 215 (9th Cir.1988)).

Scienter may be established by showing that the defendant acted recklessly. Hollinger v. Titan Capital Corp., 914 F.2d 1564, 1568-69 (9th Cir.1990) (en banc). Recklessness in this context is “a highly unreasonable omission, involving not merely simple, or even inexcusable negligence, but an extreme departure…