The U.S. Securities and Exchange Commission claims that a socially-responsible mutual fund improperly bought some irresponsible investments.

The SEC alleges that Pax World, an SEC-registered investment adviser to several socially responsible mutual funds, purchased at least 10 securities that the funds’ socially responsible investing restrictions prohibited them from buying — contrary to representations it made to investors and the boards of the funds.

The firm agreed to settle the SEC’s charges, without admitting or denying its findings, and was ordered to pay a penalty of US$500,000.

According to today’s SEC order, Pax World violated the funds’ SRI restrictions by making purchases in the securities of companies that derived revenue from the manufacture of alcohol or gambling products, derived more than 5% of their revenue from contracts with the U.S. Department of Defense, or failed to satisfy the funds’ environmental or labor standards. The SEC also alleged that the firm failed to consistently follow its own internal SRI-related policies and procedures that required that all new securities be screened by Pax World’s Social Research Department prior to purchase to ensure compliance with the funds’ SRI disclosures.

“Advisors simply cannot tell investors they are going to do one thing with their funds and then not follow through on those promises,” said Linda Chatman Thomsen, director of the SEC’s Division of Enforcement, in a release. “This is particularly true with socially responsible mutual funds because their stated investment restrictions are likely the primary reason an investor chooses to invest in these funds in the first place.”