WASHINGTON D.C. (

TheStreet

) -- New Jersey on Wednesday became the first state to be charged by the Securities and Exchange Commission for violations of federal securities laws.

The SEC said on Wednesday that it had charged the state with securities fraud for misrepresenting and failing to disclose to municipal bond investors that it was underfunding its two largest pension plans.

According to the SEC order, New Jersey offered and sold more than $26 billion worth of municipal bonds in 79 offerings between August 2001 and April 2007. But the offering documents masked the fact that New Jersey was unable to make contributions to the Teachers Pension and Annuity Plan and the Public Employees' Retirement System without raising taxes or cutting other services.

The failure to disclose this information misled investors, who were unable to make a fair assessment of the state's financial condition.

"All issuers of municipal securities, including states, are obligated to provide investors with the information necessary to evaluate material risks," said Robert Khuzami, Director of the SEC's Division of Enforcement. "The State of New Jersey didn't give its municipal investors a fair shake, withholding and misrepresenting pertinent information about its financial situation."

New Jersey agreed to settle the order without accepting or denying the SEC's findings. The SEC's order requires the state to cease and desist from committing or causing further violations.

-- Reported by Shanthi Venkataraman in New York.

Follow TheStreet.com on

Twitter

and become a fan on

Facebook.

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.