NEW YORK (AP) _ First Investors Corp. agreed Wednesday to pay $7.5 million to settle state allegations that it misled investors into buying high-risk junk-bond funds.

In addition, First Investors' president, chief executive and two sales directors will be temporarily suspended from supervising the Wall Street firm's mutual funds under the five-state agreement.

First Investors and the officers did not admit any wrongdoing.

The settlement money will be added to a $24.7 million restitution fund that First Investors created last year in an agreement with the federal Securities and Exchange Commission.

Combined with another $900,000 from the expected settlement of a private class-action lawsuit, the fund will contain a total of $33.4 million. It will be used to compensate potentially hundreds of thousands of investors in the company's junk-bond funds.

State law enforcement officials accused First Investors of using aggressive sales tactics in the 1980s to misled unsophisticated investors into believing that their junk-bond funds were as safe as a certificate of deposit.

The charges revolve around two of the company's 43 mutual funds, which are collections of securities purchased by a group of investors who pool their money.

Junk bonds pay investors high yields to compensate for the relatively high risk of the issuers defaulting on their debt.

Under Wednesday's settlement, First Investors will be permanently barred from using deceptive sales tactics in the future, New York State Attorney General Robert Abrams said.

In addition, First Investors must take wide-ranging measures to improve its selling procedures, disclosures to customers and supervisory procedures. First Investors' compliance with the settlement will be monitored by independent lawyers and accountants.

First Investors' president David Grayson will be suspended for six months and chairman Glenn Head for three months from supervising company funds. Howard Froman and Alvin Blumenfeld, sales directors of the two junk-bond funds, each will be suspended for nine months.

The settlement was signed by Maine, Massachusetts, New York, Virginia and Washington and is contingent on state and federal approvals, which are not expected for several months.