Pax World Management Corp. has agreed to pay a $500,000 fine because it failed to follow its own socially responsible investing criteria over a five-year period, when two of its mutual funds invested in off-limits industries such as gambling and liquor, and oil and gas exploration.

Portsmouth, N.H.-based Pax, a pioneer in the growing socially responsible investing niche, agreed to pay a the penalty to resolve civil charges announced Wednesday by the Securities and Exchange Commission.

David Bergers, head of the SEC's Boston office, said it apparently was the first case the agency has brought alleging violations by a mutual fund firm that purports to use social as well as financial screening criteria in making investments.

After the failures at Pax, the socially responsible investment industry — estimated to hold more than $2.7 trillion in investor assets last year, according to the Social Investment Forum — could come under closer scrutiny.

Bergers declined to say whether the SEC would specifically look into the industry, but said, "As a matter of routine practice, whenever we identify a risk area, we incorporate it into our oversight of firms."

Bergers said Pax's violations came to light as a result of a routine SEC examination.

Pax, which says it serves more than 100,000 investors, said in a statement Wednesday that it "has worked diligently" to address issues raised by an SEC investigation begun in December 2004, and has adopted stronger compliance as part of a broader reorganization since Joseph Keefe became president and chief executive in May 2005.

"We are confident that the steps we have taken to upgrade Pax World management, personnel and compliance controls will help us assure that mistakes of this nature are not made in the future," Keefe said in a statement.

The SEC found Pax violated its own restrictions after its Pax World Growth Fund and Pax World High Yield Fund — two of eight funds Pax now advises, after having launched five new funds over the past year — by purchasing at least 10 securities that screening criteria prohibited. Continuously from 2001 through early 2006, the two funds held at least one security that violated criteria, the SEC said.

The funds in 2003 bought securities issued by an oil and gas exploration company, according to the SEC.

The SEC, which did not identify any of the companies, also said the funds in 2004 bought high-yield securities issued by a conglomerate that was primarily involved in shipping, but also brought in revenue from gambling and liquor manufacturing.

The funds also violated restrictions involving their environmental or labor standards, as well as prohibitions on investing in firms receiving more than 5 percent of their revenue from U.S. defense contracts, the SEC said.

The SEC found Pax failed to screen 8 percent of its new security purchases from 2001 to 2005.

"Advisers 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, the SEC's enforcement director.

Pax said the portfolio managers that had overseen the two funds at which the SEC found violations are no longer employed by Pax. The firm's head of social research at the time of the failures also has left, along with the chief compliance officer, Pax said.

Pax agreed to pay a $500,000 civil penalty to resolve the SEC case, as well as consenting to a censure and cease-and-desist order.

Pax's Growth Fund held $103 million in assets as of April 30, while the High Yield Fund held $106 million.

Pax says its World Fund launched in 1971 was the first broadly diversified publicly available mutual fund to apply social criteria, and the industry has grown in recent years as many investors become more concerned about the impact of their investment decisions.