Banc of America Investment Services was fined $100,000 by the Massachusetts Securities Division Wednesday for misleading investors in the purchase of step-up notes. A step-up note or bond is a debt security with a floating rate that increases over time. BAI employees John Keating and Reggie Aquino allegedly sold $2.7 million in step-up bonds through their branch in Hingham, Mass., telling investors that the bonds were backed by the federal government, more specifically Fannie Mae and Freddie Mac. However, both government-sponsored enterprises make very clear in their rules regarding step-up bonds that "neither the U.S. government nor any other agency…is obligated to fund our mortgage purchase or financing activities or to guarantee our securities and other obligations," according to Freddie Mac. Fannie Mae regulation says while the GSE is a congressionally chartered enterprise, "the U.S. government does not guarantee, directly or indirectly, our securities or other obligations." The bonds were issued between January 2008 and October 2009. The complaint was filed June 16. All of the 19 investors were more than 60 years old. In addition to the fine, secretary to the Massachusetts Securities Division William Galvin requires that BAI be reviewed by an independent compliance consultant and employees take part in a compliance training program. According to the  Massachusetts regulator's consent order, Keating is placed on heightened supervision for two years. According to the Boston Herald, Aquino is no longer with BAI. Write to Christine Ricciardi. Disclosure: The author holds no relevant investments.