The New York state comptroller decided, on Wednesday, to put a ban on placement agents for facilitating deals between investment firms (such as private equity and hedge fund firms) and public pension funds, reports Wall Street Journal (WSJ). State Attorney General Andrew Cuomo would also prohibit companies that donate to the state controller from getting pension business for two years.

The report added that there will be more provisions for transparency. Cuomo, according to a report in Daily News, is also expected to push legislation that replaces the state controller's sole trusteeship over the pension fund with a board.

Former state senator Daniel Hevesi’s top political consultant, Hank Morris, and pension deputy David Loglisci have been indicted on charges that they steered billions in pension fund business to companies that agreed to pay kickbacks to them or to Hevesi's political cronies.

Financial services giants like Credit Suisse Group, Blackstone Group and Lazard Ltd., also run successful placement agent units. They perform various services for their clients such as making investor presentation, marketing materials, making introductions etc., to help investors win businesses. 

The use of placement agents has increased in the past few years with the growth of hedge funds and private equity firms. Also, falling profits and the credit crunch in the market have compelled firms to raise money, which has been generating more business for the placement agents. 

According to London-based research firm Preqin Ltd. , There are 150 to 200 placement agent firms globally serving the private-equity industry.  

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