U.S. and state investigators forged the agreement with GE Funding Capital Market Services, a GE business unit that was discontinued in April 2010. The actions took place between 1999 and 2004.

It is one of five settlements that the U.S. Securities and Exchange Commission, Justice Department and state agencies have reached with financial institutions charged with bid-rigging -- and the smallest so far.

Over the last year authorities reached settlements of nearly $700 million with four other institutions: Wachovia Bank (WFC.N) for $148 million, J.P. Morgan Securities (JPM.N) for $228 million, UBS Financial Services (UBSN.VX) for $160 million and Banc of American Securities (BAC.N) for $137 million.

The investigation, which also involves states' attorneys general, has spanned some five years. The Justice Department said that work was continuing.

More cases are likely in the pipeline. A class action lawsuit filed by cities in California in late 2009 noted that more than 30 commercial and investment banks, insurance companies and brokers had been subpoenaed as part of the federal investigation.

The probe has centered on traders deciding in advance which investment house would win the auctions of guaranteed investment contracts. These are essentially investments that cities and counties buy with proceeds from municipal bond sales.

Often there is a delay between the floating of bonds and the payout of money, allowing some time to invest.

GE, the largest U.S. conglomerate, said on Friday that it exited the business in question in April 2010 and that the three employees involved no longer worked for it.

The director of the SEC's Division of Enforcement, Robert Khuzami, said, "Our in-depth investigations have uncovered pervasive corrupt practices in the municipal securities reinvestment market, and we are requiring financial firms one by one to step up and pay the price for their misconduct."

GE Funding Capital Market Services acknowledged that some of its traders entered agreements to manipulate the bidding process for municipal investments and related contracts, among other activities, the Justice Department and SEC said.

GE said it was "pleased" to have resolved the matter and that it had already accounted for the settlement costs in prior quarters.

Its shares were up 15 cents at $18.20 in afternoon trading on the New York Stock Exchange.

Eighteen people including the former GE staffers have been charged and nine have pleaded guilty.

(Reporting By Jeremy Pelofsky in Washington, additional reporting by Scott Malone in Boston; Editing by Steve Orlofsky, Dave Zimmerman)

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