XP Investments US, LLC has agreed to pay a fine of $225,000 as a part of a settlement with the Financial Industry Regulatory Authority (FINRA).
From June 2017 through February 2018, XP recommended three private placements to its customers without conducting reasonable due diligence, and thus without satisfying its reasonable-basis suitability obligation in violation of FINRA Rules 2111 and 2010. During this period, the firm also did not establish and maintain a supervisory system reasonably designed to achieve compliance with FINRA Rule 2111 in violation of FINRA Rules 3110 and 2010.
Additionally, from March 2020 to October 2021, XP did not establish and maintain a supervisory system reasonably designed to achieve compliance with FINRA Rule 5210, which prohibits non-bona fide trading, in violation of FINRA Rules 3110 and 2010.
XP also committed several violations concerning customer confirmations and trade reporting. Between May 2018 and February 2024, XP provided retail customers with confirmations for approximately 7,000 corporate bond transactions that inaccurately stated that the firm acted in an agent capacity in violation of Exchange Act Rule IOb-I0, promulgated under § 1O(b) of the Securities Exchange Act of 1934, and FINRA Rules 2232 and 2010 and further did not provide those customers with mark-up and mark-down information in violation of FINRA Rules 2232 and 20I0.
XP also did not disclose its mark-ups and mark-downs as both a total dollar amount and as a percentage of the prevailing market price for approximately 1,100 additional corporate bond transactions in violation of FINRA Rules 2232 and 2010.
From January 2021 to December 2023, XP reported 3,419 customer transactions in corporate debt securities to the Trade Reporting and Compliance Engine (TRACE) as agent when those transactions should have been reported as principal in violation of FINRA Rules 6730 and 2010.
XP also did not establish and maintain a supervisory system, including written supervisory procedures, reasonably designed to achieve compliance with Exchange Act Rule 1Ob-10 and FINRA Rules 2232 and 6730 in violation of FINRA Rules 3110 and 2010.
On top of the fine, the firm has agreed to a censure and partial restitution of $575,000.
XP has been a FINRA member since 2011. The firm is headquartered in New York, New York and has 109 registered representatives across three branches. XP’s business includes, among other things, acting as an introducing broker that facilitates buying and selling of equity and debt securities, mutual funds, and private placements.
