According to FINRA, XP Investments US, LLC was censured, fined $225,000, and ordered to pay $575,000 in partial restitution for multiple regulatory violations including inadequate due diligence on private placements and trade reporting failures.

The firm recommended three private placements involving real estate projects intended for co-working spaces and hotels without conducting reasonable due diligence. The firm failed to obtain financial information necessary to understand the capital structure, evaluate projected returns, or understand all associated risks. The firm also did not adequately research the company and its founder. These offerings eventually resulted in foreclosures and bankruptcy, causing losses for customers who purchased $3,619,550 in securities.

Additionally, the firm failed to supervise trading activity for potential non-bona fide trading. The fixed income desk would cause an affiliate fund to purchase bonds from the firm to avoid breaching internal risk limits, then buy them back. The firm had no systems to identify this potentially manipulative activity.

The firm also provided inaccurate confirmations to retail customers, stating it acted as agent when it actually acted as riskless principal, failing to disclose mark-up and mark-down information. Trade reports to TRACE also incorrectly identified the firm's capacity.

This case demonstrates the importance of thorough due diligence before recommending private placements and the need for proper trade reporting. Investors should be aware that private placements carry significant risks and that firms have obligations to investigate before recommending such investments.