State Street Corp. told some preferred investors in 2007 that one of its bond funds was almost entirely invested in subprime mortgage securities, allowing them to get out. Others were kept in the dark, costing them millions of dollars. State Street's selective disclosure came to light Thursday when it agreed to pay more than $310 million in penalties and restitution to settle accusations by the Securities and Exchange Commission and Massachusetts officials that it misled investors about risk associated with the bond fund and other funds that invested in it. 'State Street gave preferential treatment to some investors over others, leaving many investors -- including dozens of Massachusetts charities and retirement funds -- completely unaware of key facts about the funds,' the attorney general, Martha Coakley, said in a statement. According to a complaint filed by the SEC, State Street set up the Limited Duration Bond Fund in 2002 and marketed it as an alternative to a money market fund. By 2007, however, the fund was almost entirely invested in subprime securities. State Street misled many investors about the fund's exposure, the SEC said, but provided particular investors with more complete information. Those investors included clients of State Street's internal advisory groups, which advised some investors in the fund. The advisory groups recommended that their clients, including State Street's own pension plan, redeem their investments. State Street sold the most liquid holdings to meet these redemptions, the SEC said, leaving the remaining investors with largely illiquid holdings. The funds, which were managed by State Street Global Advisors, accounted for about $13 billion of State Street's funds under management in 2007. The settlement will be allocated among about 270 investors who lost money. It includes a $50 million fine and $8 million in forfeited advisory fees and interest. The payment is in addition to $350 million the bank will pay to settle private claims, the SEC said. The bank will pay an additional $20 million to settle with Massachusetts authorities. As part of the settlement State Street does not admit or deny the allegations. 'We value our reputation as a trusted fiduciary to institutions around the world and we recognize the critical importance of fulfilling our fiduciary obligations. As such, we were determined to work with our regulators and with our customers to resolve their concerns,' Ronald E. Logue, State Street's chairman and chief executive, said in a statement. 