Robert E. Brennan, the millionaire founder and president of First Jersey Securities Inc., has become familiar to millions of television viewers who have seen the firm's commercials promising a bright future for those who invest in the small companies First Jersey favors.

Off the screen, Brennan has been fighting for the last seven years with the Securities and Exchange Commission, which, he asserts, is "trying to put us out of business."

The SEC is pursuing a 1979 civil complaint that accuses the firm, Brennan and other principal officers of defrauding customers by charging "excessive" and "unreasonable" prices for certain stocks during the 1975-1978 period. According to the SEC complaint, First Jersey and some of its top officers were able to dominate and manipulate trading of the stocks of five small companies it actively sells, buying low and selling high.

First Jersey denies the charges. Brennan, the 38-year-old majority owner, said in an interview that the SEC accusations "are old. They're rusty. They're false."

Brennan has built a fortune that he estimates at $10 million in the securities business and says the firm's growth refutes the SEC's allegations. By his account, First Jersey has 160,000 customers, some 500 salesmen and 23 offices nationwide, including an active Fairfax County branch. "Our customers have stuck by us," he said. "You can't have that kind of success unless you're treating your customers honestly and fairly," Brennan said.

The latest and most unusual turn in this legal marathon occurred last week. A hearing on the SEC charges, scheduled for last Monday, was called off by a federal judge after First Jersey complained that the SEC had lost more than 22,000 pages of transcripts from the initial hearings on the charges in 1980, and other documents. The papers were left in an SEC hearing room in a New York City federal building when the case was recessed in 1980.

Now the SEC and First Jersey are set to square off in federal court Oct. 22, with First Jersey arguing that the case should be dropped. The records "are irreplacable . . . ," said First Jersey lawyer Lewis D. Lowenfels.

The SEC has been unable to find the papers, but has promised a full response before the Oct. 22 hearing.

The first round began with the filing of the SEC's civil complaint against Brennan, First Jersey, and other top officials of the firm. It was followed by nine months of hearings in which the SEC called former salesmen, customers and other witnesses and Brennan and his lawyers cross-examined them. According to Brennan, the hearings "didn't prove a damn thing."

The second round started in October 1980, when the hearings were suspended as both sides began negotiating a possible settlement of the charges. A proposed settlement was agreed to in December 1980 by the SEC staff and First Jersey.

Although its terms have never been officially reported, Brennan confirmed in an interview that the settlement would have barred him from any contact with his company or any other securities firm for six months and would have prevented First Jersey from seeking new customers for a month.

Such a settlement permits a regulator to impose penalties while allowing the firm or individuals under investigation to end the inquiry without admitting or denying any violation of law. Brennan says that he initially agreed to the settlement because of the costs of continuing the defense and "for the sake of expediency and to resolve old differences, and to carry on with our growing business."

This summer, however, Brennan and First Jersey decided to withdraw the proposed settlement. Brennan said in an interview that First Jersey's "most valuable asset" is the "integrity of the firm and our people" and that he will fight to protect that.

With First Jersey's withdrawal of the settlement, the SEC also is renewing the fight.

First Jersey's specialization is small and mid-sized companies whose stock can be purchased at low prices ranging from a few cents to a few dollars a share. Its ads speak of First Jersey's "knack for weighing risks and picking winners."

Brennan, other top First Jersey officials and the firm itself own large blocs of stock in some of these companies, such as Chefs International, International Thoroughbred Breeders and Sequential Information Systems. First Jersey is a principal market maker for some of these, carrying out customers' trades and trading from its own inventory of stocks. "That's what we do, just like all the other market makers: We buy and we sell," Brennan says. (However, he says he has never sold any of his personal holdings in these three stocks.)

First Jersey's salesmen spend much of their time "prospecting" for clients, in the firm's terminology, a salesman often making 50 to 100 telephone calls in a typical day to people whose names have been found in telephone books, alumni directories, newspaper columns and other such sources or passed on by customers.

Those who express interest in the telephone solicitation are introduced to the select list of stocks that First Jersey actively promotes. The firm says it offers other investments too, such as mutual funds, but its main business centers on the small companies it favors.

Brennan says these companies and others sold by First Jersey offer the potential of large profits if the stocks advance. He acknowledges that these stock are also risky propositions. But he says that First Jersey salesmen are required to advise potential buyers of the risks as well as the potential rewards.

"Our philosophy is simple. We don't buy stock for safety and income because all stocks have risks," he said. Brennan also pointed to policy statements he said are issued by the firm to salesmen, and to regular written reminders to them to maintain close contact with customers and familiarize themselves with their customers' investment goals and financial limitations.

At the hearing in 1980, the SEC asked salesmen whether their First Jersey superiors instructed their salesmen to conduct coordinated sales campaigns to sell the stock of the companies to the firm's customers and potential customers, creating a surge in orders that would push up the price.

One witness, a former First Jersey salesman named Raymond Abbate, testified that he followed a "cycle of prospecting" involving "setup, phone calls and sales recommendations." He would spend weeks lining up prospective customers; then alert them that First Jersey would soon have a specific recommendation. Finally, salesmen were gathered together and told by their superiors what stock the firm would be promoting and given a script to read to customers, he testified. "We . . . would be given the sales presentation, price of the stock, the commission for that particular stock and told when to start," Abbate testified in 1980.

Randell Hosbrouk, who worked at two different First Jersey offices in New Jersey between August 1978 and February 1979, testified that the time period for selling a particular stock varied, but generally lasted a day or two, with a different stock recommendation every four weeks. Another former salesman said the sales period usually lasted a week.

However, Brennan, who joined First Jersey's attorneys in the cross-examination of witnesses at the SEC hearing, asked Abbate whether Abbate had ever been told or encouraged by First Jersey officials to violate securities law or fair practice rules. "No sir," replied Abbate. The other salesmen called by the SEC gave similar responses on cross-examination.

One SEC complaint of alleged manipulation involves First Jersey's trading in early 1975 of the stock of Glenco Scientific, a small biomedical research firm. According to the complaint and testimony at the hearing First Jersey purchased 98,625 shares from Glenco for between $1.50 and $2 a share. Brennan's father and mother-in-law purchased 26,000 shares each, the SEC says, selling all of it to First Jersey for between $2.25 and $3 a share. Within a few weeks of those purchases, First Jersey was selling 160,000 shares of Glenco to the public at an average price of $4.53 a share, according to the SEC's complaint. The SEC contends that these prices were "excessive," "unreasonable," and artificially set by First Jersey, not established by the market.

Brennan said in an interview that the SEC's information about the Glenco trading, presented at the hearings three years ago, contained "substantial errors." He said, "I don't remember the exact prices. I can tell you that at or about that time my former mother-in-law and my father did sell some stock."

But, said Brennan, regardless of the purchase price, Abbate had testified that all of his customers made a profit on their Glenco transactions. "So, not only did they all make money, but it wouldn't have been important to them to know that" Brennan's relatives had also been trading the stock, Brennan said.

The SEC is attempting to show that First Jersey was able to "dominate" trading in Glenco and the other stocks cited in the complaint because the number of shares traded was relatively small and most of the trading was due to the firm's sales campaigns.

Brennan said that charges of domination "are absolutely false. First Jersey does not dominate the market in any stock . . ." He cited several other firms which also trade in the stocks allegedly dominated by First Jersey.

Brennan said there is no pattern of sales campaigns at his firm and a competitive business could not operate in such a way. He was supported in the SEC hearings by the testimony of Richard Egan, an assistant branch manager at First Jersey, who said that the firm's rules prohibit high-pressure sales tactics, that salesmen are fully briefed on the companies they recommend, and that they are required to visit customers personally to see that the kinds of stocks First Jersey recommends are suitable for the customers.

In an interview, Donald A. Robinson, an attorney for First Jersey, pointed out that Egan and all of the other witnesses had been called by the SEC to make its case and were not First Jersey's witnesses.

Brennan says in interviews that the SEC's charges are also contradicted in the tens of thousands of responses to its annual client questionnaire -- the overwhelming majority of them indicating complete satisfaction with the firm and its salesmen, and reporting no instances of high-pressure tactics or misleading information. First Jersey would not give reporters access to the questionnaires on grounds of confidentiality and privacy, but Brennan provided copies of about a score of replies and an affidavit from one customer who had testified before the SEC.

The questionnaire responses from customers that Brennan provided showed full satisfaction with First Jersey. The customer who testified, John S. Satterthwaite, a New Jersey businessman, said that in seven years of dealing with First Jersey, he has found the firm to be "courteous, honest and professional. . ." He said he had frequent meetings with the First Jersey salesman handling his account to discuss investment decisions--service that he did not get from larger, better-known brokerage firms. Satterthwaite said he told the SEC that he never encountered high pressure or unethical sales practices when dealing with First Jersey.

One local customer interviewed by The Post reported a negative experience with First Jersey:

Marge Badeaux, a telephone operator from Hammonton, N.J., said that in 1980, she invested a profit from trading one of First Jersey's recommended stocks plus some other funds in a company called URT Inc., which First Jersey had recommended. "Because I did so well on the other one and I had $1,000 handy" she bought URT Inc., she said in an interview. By 1981, however, she said she needed the money and decided to sell. She said Gary Venuto, the First Jersey official handling her account "kept giving me excuses for not selling the stock, such as that the price was down and would come back up."

She sold URT through First Jersey in February 1982, and out of her $1,100 invested, she ended up with $300 -- a bigger loss, she says, than if Venuto had sold her stock when she first asked him.

Venuto, in a statement, said that while he had advised her not to sell the URT stock, "I did not resist her order to sell, but I merely explained to her that it was my opinion that she would do better holding these stocks over the long term rather than taking short term losses."

Brennan was asked about statements by Badeaux and several other First Jersey customers who complained they encountered resistance from First Jersey salesmen when they sought to sell stocks through the firm. He said the firm's policy requires salesmen to follow customers' wishes as well as knowing their investment needs.

"First Jersey salesmen do not resist repurchasing stock that they've sold to their customers unless a First Jersey salesmen believes that that is in the customer's best interests," Brennan said in an interview. "What these people may have done is to confuse offering an opinion with resisting an order," he said. Furthermore, it is First Jersey's policy to deliver stocks promptly to customers, and they could then sell them through another firm, if they felt First Jersey wasn't acting quickly enough, Brennan said.

For every dissatisfied customer, says Brennan, there are tens of thousands of contented ones.