United States Court of Appeals
                          FOR THE EIGHTH CIRCUIT
                                  ___________

                                  No. 02-3439
                                  ___________

Christopher A. Lowry,                  *
                                       *
            Appellant,                 *
                                       * Appeal from a Decision of the
      v.                               * Securities and Exchange
                                       * Commission.
Securities and Exchange                *
Commission,                            *
                                       *
            Appellee.                  *
                                  ___________

                            Submitted: March 13, 2003

                                 Filed: August 12, 2003
                                  ___________

Before WOLLMAN, RICHARD S. ARNOLD, and SMITH, Circuit Judges.
                         ___________

SMITH, Circuit Judge.

       The Securities and Exchange Commission (Commission) sanctioned
Christopher Lowry for failing to report to the Commission and inform investors of a
personal loan his company made to him. Lowry appeals that decision. For the reasons
stated herein, we affirm.

                                     I. Facts
      Lowry, a registered investment advisor, owned and operated Lowry Investors
Services, Inc., also known as "No-Load Advisors." In 1994, Lowry developed a
business idea to provide lower-priced investment advisory, educational, and
administration services to 401(k) plans by aggregating smaller 401(k) plans. He
named this new company "401(k) University,"1 and Lowry, as CEO, designated
himself "Dean of Students." Several of Lowry's existing clients invested in his new
company. Lowry, however, failed to establish a separate bank account for 401(k)
University and commingled the investment funds for 401(k) University in No-Load
Advisors's bank account.

        In 1999, Lowry intertwined his business and personal affairs. In order to
accelerate acquisition of a home, Lowry used investors' funds to finance his home
purchase. In August 1999, Lowry approached client Phillip Allen about extending a
short-term loan to, or investing in, 401(k) University.2 Lowry proposed that 401(k)
University would pay Allen a fifteen-percent return for a six-month loan. For security,
Lowry offered certain real estate. However, Lowry did not tell Allen that the real
estate would be Lowry's future home and that he planned to use Allen's loan to
finance it. Lowry wrote the loan agreement, included the security arrangements, and
sent it to Allen.

      Lowry further blurred distinctions between himself and his businesses by
closing the home purchase with funds from No-Load Advisors's bank account derived
from 401(k) University's stock sale. Lowry's plan to use the proceeds from the Allen


       1
           401(k) University is also known as Fountainhead Retirement Plan Services
Inc.
       2
        Allen, a No-Load Advisors client, was one of a several people Lowry had
consulted regarding his plans for 401(k) University. Allen had told Lowry in the past
that he and his father-in-law might be interested in becoming investors in 401(k)
University and later indicated that he was willing to invest for shorter-time periods
if needed. In May 1999, Lowry had no need for such arrangements. This need
changed in August 1999 with Lowry's housing crisis, so Lowry sought a secured
business loan from Allen.

                                         -2-
loan to 401(k) University to close his home purchase fizzled because the closing date
arrived before he acquired the loan proceeds from Allen. To document his withdrawal
of funds from No-Load Advisors's account, Lowry executed a promissory note for
$156,500 to be paid to "Fountainhead," also known as 401(k) University. However,
Lowry did not disclose this transaction to either company's shareholders nor to the
Commission. He claims he did not know disclosure was required.

        Soon after Lowry closed the home purchase, the SEC investigated and
intervened in the management of Lowry's companies. The Commission notified him
that it planned to inspect the companies and, in December 1999, the Commission
served Lowry with subpoenas for the production of documents and for his testimony.
Lowry hired an attorney for the company. On February 15, 2000, the Commission
obtained an ex parte order from federal district court freezing Lowry's and 401(k)
University's assets. The Commission also placed a lien on Lowry’s home. The
Commission's intervention aborted Lowry's efforts to secure the Allen loan or a
conventional loan for his home. The assets remained frozen for the next ten months.
Following the entry of the order freezing the assets, Lowry hired a lawyer to represent
him personally.

       During the pendency of the investigation, Lowry maintained good
communication and relations with his companies' investors. Lowry met with
individual shareholders in the early months of 2000. He attended a shareholder's
meeting in May 2000 and gave the shareholders copies of the Commission's
complaint, the motion papers for the injunction, and his financial disclosure
statements. He apologized to the shareholders for his failure to make full disclosures
sooner. The shareholders continued to be separately represented by counsel, and they
ratified the house loan to Lowry. Lowry later repaid the individual investors of 401(k)
University pursuant to the agreement with the Commission. For the most part, the
investors then reinvested the funds in the corporation.



                                         -3-
       The Commission pursued both judicial and administrative remedies against
Lowry. The judicial proceedings against Lowry culminated with the district court's
December 7, 2000, stipulated order. As part of the stipulation, Lowry neither admitted
nor denied the allegations of the complaint, but agreed not to deny the allegations of
the complaint. The court's order further enjoined Lowry from violating federal
securities laws. On January 8, 2001, Lowry moved for an independent order for
disgorgement, and the court entered that order on January 22, 2001. That order
released the lien on Lowry’s home, and he was able to obtain a mortgage.

      A few weeks after the court's stipulated order, the Commission began an
administrative proceeding to sanction Lowry. Following a hearing on April 17, 2001,
a Commission Administrative Law Judge issued an initial decision on September 14,
2001, barring Lowry from associating with an investment adviser. Lowry petitioned
the Commission for review, and the Commission issued its order affirming the
decision on August 30, 2002. Lowry now appeals the Commission's decision,
claiming that it is too harsh.

                                    II. Discussion
       On appeal, Lowry raises three arguments. First, he argues that the sanctions the
Commission imposed–particularly that of being barred from associating with an
investment advisor–were unwarranted when applying the factors created by the Fifth
Circuit in Steadman v. SEC, 

(5th Cir. 1979). Second, Lowry argues
that the sanctions are disproportionate to those assessed in other cases. Finally, Lowry
argues that the Commission made factual errors and unsupported findings on which
the sanctions were based.

                              A. Standard of Review
       The Commission's choice of sanctions is reviewed for a gross abuse of
discretion. Kane v. SEC, 

, 201 (8th Cir. 1988). The Commission's
findings of fact must be affirmed if supported by substantial evidence. Lowell H.

                                          -4-
Listrom & Co. v. SEC, 

, 941 (8th Cir. 1986). This court gives conclusive
effect to the factual finding of the Commission if those findings are supported by
substantial evidence. Stephen Investment Securities, Inc. v. SEC, 

, 341
(8th Cir. 1994). The choice of sanction may not be overturned unless we find it
"'unwarranted in law or . . . without justification in fact . . . .'" 

(quoting Butz v. Glover Livestock Comm’n Co., 

, 185–86 (1973); see
also American Power Co. v. SEC, 

, 112–13 (1946).

       On judicial review, an agency's interpretation of its own regulations is entitled
to substantial deference when the interpretation is consistent with the language of the
authorizing statute and the purpose of the regulation. 

; see
also United States v. Larionoff, 

, 872–873 (1977). The court’s role is to
decide only whether, under the applicable statute and the facts, the agency made "an
allowable judgment in its choice of the remedy." 

(quoting Jacob Siegel Co. v. FTC, 

, 612 (1946)). The Steadman court
determined that "permanent exclusion from the industry is 'without justification in
fact'" unless the Commission specifically articulates compelling reasons for such a
sanction. 

       The underlying purposes of the securities laws include promoting disclosure
of information, protecting the investing public, controlling fraud and manipulation
in trading securities, and facilitating compliance. Id.; SEC v. Southwest Coal &
Energy Co., 

(5th Cir. 1980).

                             B. Steadman Factors3
      The Commission applied the six-factor analysis first outlined in Steadman to
determine the appropriate sanction for Lowry's misconduct. The Commission's

      3
      We have not formally adopted the Steadman factors for sanctions violations.
However, the Commission used the factors as the basis for assessing sanctions, and
Lowry does not object to their use.
                                           -5-
analysis justified imposing the severe sanction of barring Lowry from associating
with an investment advisor. Lowry argues that the Commission misapplied Steadman.
We disagree. In Steadman, the Fifth Circuit remanded a matter to the Commission for
further findings on a sanctions issue after determining that the Commission failed to
provide sufficient analysis to support the sanction. The court noted that it had not
reversed the Commission, but instead wanted to provide the Commission with the
opportunity to justify its position. To facilitate the Commission's analysis, the Fifth
Circuit provided factors4 for the Commission to consider. These factors include (1)
the egregiousness of the defendant's actions; (2) the isolated or recurrent nature of the
infraction; (3) the degree of scienter involved; (4) the sincerity of the defendant's
assurances against future violations; (5) the defendant's recognition of the wrongful
nature of his conduct; (6) the likelihood that the defendant's occupation will present
opportunities for future violations.5

         1. Egregiousness of Actions /Isolated Infraction/Degree of Scienter
       Lowry admits error, but he contends that his conduct reflected neither
egregiousness nor the high degree of scienter usually indicative of investor fraud. He
asserts that he repaid the funds to 401(k) University, the investors ratified his actions
and supported him thereafter, and his actions were related to only one isolated
transaction. He argues that there must be something more than a "bare" reporting
violation to make an action egregious, and he asserts that he never had the intent to
"defraud" any of the investors when he made the loan from the coffers of 401(k)
University. Lowry attempts to palliate his actions by claiming that he could have paid
himself a higher salary or repaid himself a loan he made to the No-Load Advisors.

      4
        The factors used in Steadman for assessing sanctions also have been used in
considering the propriety of an injunction. See SEC v. Youmans, 

(6th
Cir. 1984); SEC v. Blatt, 

, 1334 n.29 (5th Cir. 1978).
      5
       Lowry addresses each of these factors separately, but we combine the analysis
of them. The Commission did likewise because of the similarity of some of the issues
and arguments.
                                          -6-
       Lowry misreads Steadman. Steadman stands for the proposition that the
sanction of complete bar should not apply in a case of isolated negligence on the part
of an investment 

. However, Lowry does not present such
a case. The Commission found that Lowry committed substantially more than an
isolated negligent act–rather, he committed a series of knowing acts. Lowry solicited
investments before and after the "loan" without disclosing his intent and actions.
Lowry attempted to conceal his conduct by failing to provide the promissory note to
the Commission investigator in their initial audit and by his delay in telling the
investors of the reason for the Commission's investigation. Lowry, at one point,
admitted that he used the money to pull himself out of a "tight spot."

       The time-line of events proves that Lowry intended to use 401(k) University's
investor money, whether from the Allens' loan or from other investor stock sales, to
pay for the house without giving notice to the investors in direct violation of
securities laws. Furthermore, despite Lowry's claims that he believed that his actions
were permitted and that he did not know these actions were a violation of law, he
spent considerable effort to conceal exactly how he planned to use the Allens' and the
other investors' funds. Finally, although he asserts that he planned to immediately
repay the money, the facts show that by the time his accounts were "frozen" on
February 15, 2000, Lowry had only spoken with a mortgage broker about obtaining
a mortgage. In the three or four months after Lowry used 401(k) University's investor
funds to buy his home, he reached no agreement with a mortgage lender.

      Lowry's conduct meets the scienter requirement supporting the assessment of
sanctions. In Tager v. SEC, the Second Circuit noted that, generally, "willfully"
means "intentionally committing the act which constitutes the violation. There is no
requirement that the actor also be aware that he is violating one of the Rules or Acts."

, 8 (2d Cir. 1965). Furthermore, although the Steadman court noted that
scienter is a necessary element to consider when imposing sanctions, a finding of



                                          -7-
recklessness suffices.6 See Ernst & Ernst v. Hochfelder, 

, 193 (1976)
(suggesting reckless disregard for the truth may suffice as scienter in some
circumstances); First Virginia Bankshares v. Benson, 

, 1314 (5th Cir.
1977) (noting recklessness is adequate for scienter). At the least, Lowry's use of
401(k) University's investor funds was reckless. It is clear that Lowry planned to use
the funds for personal reasons without advising his investors or the Commission of
the transaction. His actions evidence a "highly unreasonable omission" and "an
extreme departure from the standards of ordinary care" that Lowry, as a seasoned
investment advisor, knew or should have known would have misled the company's
investors and the Commission. Southwest 

n. 17 (citation
omitted).

               2. Sincerity of Assurances Against Future Violations/
                             Recognition of Wrongdoing
       Lowry next argues that there are no "magic words" he can use to convey his
regret or assure the Commission that he would not violate securities laws again. He
argues that proposed controls created by the stockholders guarantee that he could not
misuse 401(k) University's funds again. Lowry argues that while he recognizes his
wrongful conduct, the investors ratified his actions and continued to support him, he
has no prior record of infractions, and his clients have made money rather than lose
money with him at the company's helm.




      6
        The Fifth Circuit in Southwest Coal, a violations case, described the degree
of recklessness necessary to qualify as scienter as "'a highly unreasonable omission,
involving not merely simple, or even unexcusable negligence, but an extreme
departure from the standards of ordinary care, and which presents a danger of
misleading buyers or sellers that is either known to the defendant or is so obvious that
the actor must have been aware of 

n. 17 (quoting Franke v.
Midwestern Okla. Devel. Auth., 

, 725 (W.D. Okl. 1976)).
                                          -8-
       These Steadman factors are, in large part, based on a credibility determination
by the Administrative Law Judge. Lowry presents no convincing argument that the
Commission's findings as to his sincerity should not stand. The facts reflect
purposeful conduct on his part, and we will leave determination of his credibility as
to his future actions and contrition for past actions to the finder of fact.

                        3. Opportunities for Future Violations
       Finally, Lowry argues that protecting the investing public should be secondary
to protecting the particular investors in this case. He asserts that if he is barred from
providing investment advisory services through 401(k) University or No-Load
Advisors, a primary goal of 401(k) University will be "unattainable." Lowry again
notes that the investors ratified his actions in the May 2000 shareholder meeting and
created protections that would prevent Lowry from having sole control over the funds
in the corporate coffers. He argues that while the purpose of the securities law is to
protect the investing public, the actual investors in the particular company are those
who are most affected. And, he argues, these investors would be harmed by this
sanction.

        We reject Lowry's argument. A similar argument was asserted in Tager,
wherein the defendant, who had his membership in the National Association of
Securities Dealers revoked, argued that he had no history of previous violations, he
cooperated with the Commission in that and other investigations, he caused no public
investment losses due to his violations, and he was inexperienced. In considering
these factors, the Second Circuit determined that "[w]hile these factors might have
warranted a lighter sanction, they did not require 

. The Second
Circuit reaffirmed this stance in United States v. Brown, 

, 339 (2d Cir.
1977), wherein the defendant failed to persuade the court that a lack of actual "injury"
to the investors should prevent a finding of criminality under the securities laws. See
also O’Leary v. SEC, 

(D.C. Cir. 1970) (salesman barred from further
participating in securities business although he was a first offender acting in accord

                                          -9-
with advice of counsel and causing no injury to investing public). The Commission's
assessment of sanctions reflects a reasonable application of the Steadman factors.

                            II. Disproportionate Treatment
       Lowry next asserts that the sanctions imposed on him were disproportionate
to those in other cases. The United States Supreme Court addressed a similar issue
in Butz, 

.7 In Butz, the defendant argued that the sanction of suspension
was unreasonable, in part because it was more severe than sanctions imposed in
similar cases. In response, the Court stated: "The employment of a sanction within the
authority of an administrative agency is thus not rendered invalid in a particular case
because it is more severe than sanctions imposed in other cases," and the unevenness
in the application does not automatically render it "unwarranted in law." 

Here, the Commission exhaustively analyzed Lowry’s actions and
determined that they warranted disbarment from association with an investment
advisor. And, as the Tager and O’Leary opinions highlight, even first-time offenders
can be assessed the most severe sanction of disbarment, and the facts in this case
support such a sanction.

                    III. Factual Errors and Unsupported Findings
      Finally, Lowry argues that the Commission's findings that he did not intend to
repay the money and that he "misappropriated" funds are not supported by the facts.
He asserts that the promissory note and the notation of the transaction in the company
books indicate that he did intend to repay the money. In addition, he argues that the
money was not "misappropriated" because Minnesota law allows such a loan to be
made, and the shareholders ratified the action. Finally, Lowry argues that if the
minority stockholders had chosen to challenge the loan, they could have started a civil
action to seek remedies for the improper corporate loan.

      7
        While Butz involved an appeal from a decision by the Secretary of Agriculture
rather than from the Commission, the standards for imposition of sanctions and
review are the same.
                                         -10-
       The Commission responds that Lowry's claim that he planned to repay the
"short-term" loan is not supported by the record because he failed for four months to
reveal the promissory note to investigators and he did not legitimately attempt to seek
another loan to repay the company as soon as possible. In addition, the Commission
notes that most of these allegations were contained in the complaint filed in district
court, and Lowry agreed not to dispute these findings.

       Much of this point on appeal is addressed in previous arguments. However, we
note that Lowry's claim that the stockholders had civil remedies they could pursue is
similar to an argument rejected by the Second Circuit in 

. In
that case, the defendant argued that he did not defraud investors because they had a
civil remedy to replace stock the defendant converted by counterfeit and forgery in
violation of the law. The court stated, "One might as well argue that if Brown stole
Smith’s fully insured automobile, he was never the victim of a larceny." 

This alternative-recovery theory might well provide monetary relief for the investor,
but it does not protect the investor or others from future violations. Only sanctions
for statutory violations will achieve that end. The Commission did not abuse its
discretion by barring Lowry from affiliating with an investment advisor.

      We affirm the Commission's decision.

      A true copy.

             Attest:

                CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.




                                         -11-