Gulf & Western Industries Inc. and the Securities and Exchange Commission yesterday settled a long-standing lawsuit in which the SEC had accused the conglomerate of widespread violations of federal securities laws and misuse of corporate funds.

Under the agreement, Gulf & Western and its officers and directors pledge not to violate antifraud and reporting provisions of federal securities laws. The company also agreed to adhere to bylaws adopted in negotiations with the SEC that expand the role of the company's audit committee and set up procedures to avoid the type of violations with which the company was charged.

In return, the SEC terminated its complaint againt Gulf & Western. Gulf and Western is under court order to comply with the agreement, which was filed yesterday in U.S. District Court in D.C.

The settlement grew out of charges filed by the SEC in 1979 in which the agency alleged a huge array of misdeeds. Among them, the SEC charged a pattern of manipulation of corporate funds by officials of the firm and investment of the company's pension funds in transactions that benefitted the defendants rather than the pension fund. The agency also claimed that G&W disguised corporate losses by overvaluing certain assets.

The company's chief executive officer, Charles Bluhdorn, and executive vice president, Don Gaston, also had been named in the SEC's complaint.

Gulf & Western had protested the SEC charges loudly, and Bluhdorn had vowed to "litigate this matter to the end."

"These people have cost our company millions and hundreds of millions of dollars by their arrogance," he said in a blast at the SEC a month after the agency made its accusations.

He denounced the allegations as unwarranted and outrageous, calling them "a symptom of overregulation, of little people going out after big fish." The company also countered with a lawsuit charging the SEC with improprieties in its investigation. A federal judge threw out those charges earlier this year.

Few SEC complaints have been as sweeping as the one filed against Gulf & Western and the two officials. It included allegations that millions of dollars in corporate funds had been used to puff up secretly the books of the central bank in the Dominican Republic, where Gulf & Western was a major investor.

The SEC charged that G&W had transferred money to the Dominican central bank at the end of each year to help improve the figure for dollar reserves which appeared on its annual financial statement. In return, the Dominican Republic each year allowed G&W in January to withdraw and return to the United States more of its earnings than normally would have been allowed, the SEC said.

The SEC also had accused Bluhdorn of using corporate funds in transactions in the risky sugar futures market, handling the transactions through a Bahamian subsidiary and not informing the company's board. He also arranged to have the Dominican Republic participate with G&W in sugar futures speculation, again without informing the board or shareholders, the SEC said.

The SEC went on to charge that Bluhdorn deceived Dominican officials into believing that their profits from the sugar futures deal were $19 million rather than $38 million, the SEC complaint said. But G&W's auditors were told--inaccurately, according to the SEC--that the Dominicans had agreed to that reduction in return for other considerations to aid the country's economic development. G&W did, in fact, spend $8 million on projects, including establishing a Dominican Tourist Information Center in New York City and providing financial aid for the 1977 Miss Universe Beauty Pageant in the Dominican Republic.

"I think the settlement agreement speaks for itself," said Martin Davis, executive vice president of Gulf & Western. The charges were withdrawn as part of the settlement agreement, so there is nothing to admit or deny, he said. The expanded duties of the corporate audit committee in bylaws negotiated as part of the settlement "say we'll continue to do what we're doing," he said. "It spells it out."

The agreement requires the company to continue to nominate annually at least three unaffiliated directors for the company, to maintain its audit committee and not to amend or revoke the negotiated portion of its bylaws that includes procedures to prevent abuses.

The agreement also designates the audit committee as the investment committee for employe pension funds and restricts the company's officers, directors and other related persons from entering into securities transactions with the fund.