Hibbard Brown Gets a $10-Million Fine

Hibbard Brown & Co. was fined $10 million by the National Assn. of Securities Dealers, one of the largest ever against a brokerage, for overcharging more than 6,000 investors in the sale of companies’ stocks.

The New York-based penny-stock firm, which filed for Chapter 11 bankruptcy protection in October 1994, also was censured and expelled from membership in NASD, which in effect shuts it down. Firms must be members of NASD, which polices all 5,000 U.S. brokerages, to operate.

“The firm’s activities were extraordinarily egregious,” NASD spokesman Lynn Nellius said in announcing the settlement.

Under its terms, Hibbard Brown and two of its officers--President Richard P. Brown and compliance officer DeJuan Stroud--neither admit nor deny the allegations against them. Company executives did not respond to requests for comment.

The NASD charged that Hibbard Brown sold stock of First National Realty Associates Inc. and Linkon Corp. in 1990 at markups of as much as 145% over their prevailing market price. The fine is the latest of several regulatory actions against the firm.

The NASD said there was no market for either stock except that created by Hibbard, which had its sales force push the shares. The firm never told its customers that it in effect controlled Norwalk, Conn.-based First National Realty Associates, which filed for Chapter 11 protection in 1992. Neither the real estate brokerage company nor Linkon, a New York-based voice processing company, was charged with wrongdoing.

The NASD, also parent of the Nasdaq Stock Market, is under investigation by the Securities and Exchange Commission on allegations that it has been lax in policing big firms.

A federal Bankruptcy Court in New York, which is presiding over Hibbard’s Chapter 11 filing, will decide how much of the fine is to be paid, Nellius said. The fine will be used to reimburse investors.

The investors were bilked in about 10,000 transactions, he said.