XP Stock

XP Inc. (XP) is a leading, technology-driven platform and a trusted provider of low-fee financial products and services in Brazil. The company has developed a mission-driven culture and a business model. The company uses these to disintermediate the legacy models of traditional financial institutions by educating new classes of investors, democratizing access to a wider range of financial services, developing new financial products and technology applications to empower its clients and providing what is the highest-quality customer service and client experience in the industry in Brazil. The company has established itself as the leading alternative to the traditional banks, with a large and fast-growing ecosystem of retail investors, institutions, and corporate issuers, built over many years that reached 3.9 million active clients.

Operations

The company leverages its business model to serve a diverse group of retail and institutional clients in local and international markets, with offices in Brazil, New York, Miami and London. The company serves over 3.9 million active retail clients who have an investment account with it. Approximately 22% of the company’s clients are served by one of its IFA partners whereas approximately 78% of its clients are self-served, primarily utilizing an account through one of its websites, or served by an investment adviser through XP Direct.

The company generates its revenues primarily by providing its existing clients with a growing range of financial products and services in which to invest their existing Client Assets already on its platform; attracting additional money onto the company’s platform from existing investors to grow total Client Assets; and attracting new clients and money inflows onto its platform across a variety of channels to increase total Client Assets.

Depending on the mix of products and services, the company generates numerous forms of income from Client Assets, including advisory fees, commissions, distribution fees from product manufacturers and asset management fees across various solution categories, such as retail, institutional, issuer services, digital content and other.

The company’s technology-driven business model is asset-light and highly scalable. This enables the company to generate scale efficiencies from increases in Client Assets. The company conducts the majority of its business online and through mobile applications and emphasize operational efficiency and profitability throughout its operations.

Strategy

The key elements of the company’s strategy include protecting and expanding its core business; expanding its omni-channel distribution network; growing its proprietary digital content; growing its XP platform offering; and entering into new financial sectors.

Products and Services

The company sells a wide range of products and services in various combinations to its clients. The company has developed these solutions to provide its clients with significant differentiation and a superior value proposition versus the legacy offerings of traditional banks.

Open Product Platform

The company offers its client and partners the XP Platform, which is an open product platform that provides its clients with the broadest access to investment products in the market, ranging from its own XP-branded products to those of its partners and its competitors. The open nature of the company’s product platform is highly differentiated in the market and a key driver of the early success of XP.

Brokerage Securities: Include hundreds of equity securities and futures, such as equities, iShares, or ETFs and BDRs; dollar, Ibovespa and rate futures; and commodities, such as feeder cattle, coffee, soy; corn, ethanol, oil and gold.

Fixed Income Securities: Over 150 fixed income securities, including Bank Deposits: LCI, LCA, CDB, and LC; Corporate Bonds: Debentures, CRI, CRA, LF and FIDC; Sovereign Bonds: NTN-B, NTN-F, LTN, LFTs; and Interest Rate Swaps.

Mutual, Hedge and Private Equity Funds: Over 200 XP Asset Management Funds; over 500 third-party funds curated by XP from over 160 asset managers; and over 150 international funds.

Structured Products: Derivatives and synthetic instruments including derivatives – structures set up with options, using the margin as security. Can be done with Index, Dollar, Shares, Interest, feeder cattle and corn commodities; and COE (Structured Operations Certificate) – Instruments combining fixed and variable income elements, with returns linked to assets indices, such as exchange, inflation, shares and international assets. These products appear as one single (synthetic) asset for the client, facilitating monitoring of performance and single taxation, and can have lower costs compared with investing in assets/derivatives separately.

Credit Cards: The company offers to its clients in both XP and Rico a Visa Infinite Credit Card free of charges and with a pioneer Investback program - a cash-back program that automatically invests at least 1% of every paid invoice in a liquid fixed-income fund on behalf of the customer as a reward.

Loan operations/Collateralized Credit Products: The company’s platform offers hassle-free, low-interest personal loans secured on the customer’s invested assets, which allows for rates below market averages. 90-day NPL is zero due to the structured nature of the credit.

Retirement Plans and Life Insurance: XP branded solutions and distribution of over 266 funds from 105 leading independent insurers and asset managers, including pension and social security funds; and life and travel insurance products of the main independent providers, with similar characteristics to those offered in more developed markets.

Wealth Management Services: A suite of asset organization, succession planning and other services.

Other Investment Products: Real Estate funds of corporate assets logistics, retail and receivables; and equity and debt capital markets solutions.

Marketing, Sales and Distribution

The company markets its brands and value-proposition through its proprietary media and it sells its products and services through its omni-channel distribution network and online portals, which are part of its self-reinforcing ecosystem that promotes XP’s products and services. The primarily digital, technology-enabled nature of the company’s media and its distribution is a significant differentiator.

Proprietary Media and Digital Content

The company’s media and digital content is an ecosystem of portals and initiatives that aim to democratize access to financial content in Brazil. It is composed of five key initiatives: Infomoney, XP Educação, EXPERT and XP Influencers. As the company empowers Brazilians on how to take investment decisions more independently, it helps attracts, retains and monetizes its clients. The company attracts clients by providing multiple, ongoing touch points, which help build brand awareness, trust and a greater familiarity and comfort level with investing. With millions of users navigating through its platforms monthly, the company leverages big data analytical tools and artificial intelligence technology to help create an increasingly personalized experience that helps retain clients. The company’s content also helps its clients navigate and evolve through their journey as investors, which helps them optimize their asset allocations over time.

Infomoney –Infomoney is the largest investment-related website in Latin America, with approximately 8.1 million monthly unique visitors as of December 31, 2022.

XP Educação – XP Educação is a leading financial education portal in Brazil. XP Educação provides seminars, classes and learning tools to help investors, entrepreneurs and executives to evolve through their respective journeys and according to their specific needs.

EXPERT Platform – the company’s proprietary investment phygital content platform, comprising a research group with over 30 specialists serving retail clients in Portuguese and institutional clients in English. This group produces a wide range of content, which includes insights into fixed income, equities, funds, REITs, asset allocation, economics and politics, among others, covering from the basics to a more advanced content. The company’s digital research retail platform is free and has over 1.3 million monthly visitors that come to its website, which utilizes a robust SEO strategy to attract new viewers, along with educational content and in-person events.

EXPERT Event – the company’s annual conference for clients, IFAs and partners has become the largest investment event in Latin America. In 2019, the company had approximately 30,000 attendees, over 180 sponsors, over 140 journalists in attendance, and over 940 news articles written about its event. Due to the COVID-19 pandemic, the 2020 event was held 100% digitally and free of charge for the first time in its history. The company’s EXPERT 2021, which was already considered one of the largest investment events in the world, attracted approximately 1.5 million attendees on its own digital platform, a significant increase from prior years. The event had more than 350 speakers and a total of more than 200 hours of content. In 2022, the EXPERT event was held both in-person and virtually, and had over 434,000 attendees, including over 160 sponsors, over 140 journalists, and over 2,100 news articles written about its event. EXPERT 2022 included a roster of world-renowned speakers, including former prime minister of the UK Theresa May, athlete and businesswoman Serena Williams, Oaktree Capital Management Founder Howard Marks, among many others.

Omni-Channel Distribution Network

The company onboards and serves its clients though its omni-channel distribution network, which enables its to deliver its products and services through a range of proprietary channels designed to provide different levels of service and functionality. These include:

XP Direct – The company’s full-service website and internal advisory teams focused on mass-affluent clients, which provides access to all of its products and more sophisticated functionality.

Rico – The company’s online-only solution for self-directed investors, which provides powerful, yet convenient and easy-to-use investment services, decision-making tools and custom-designed educational software applications. These are delivered through a simple, attractive and intuitive online portal that is supported by a dedicated marketing and digital media program. On September 14, 2020, the company announced the elimination of brokerage fees for online stock trades at Rico.

Clear – A part of XP since 2014, Clear was first to offer zero brokerage fees in Brazil. Clear’s goal is to provide its clients, both professional and novice investors, with the best investment experience at a low cost. One of Clear’s main highlights is an intuitive and simple Home Broker application that allows the user to invest in various asset classes in the equities and futures market, such as options, stocks, ETFs and futures contracts, among others. Clear is a 100% digital service, with innovative collateral management tools and proprietary front ends designed for retail active traders, and is integrated with the best trading platforms available in the market.

IFA Network – The company’s proprietary distribution network of approximately 12,300 IFA partners, who solicit new clients and help it onboard them as XP clients. These IFAs are located in 2,558 offices in 242 cities across the country and form the largest independent financial advisor network in Brazil, which is a competitive advantage for XP. The company’s IFA partners choose to work with XP for a number of reasons, including its deep understanding and appreciation of the IFA business model and its promotion of IFA careers given its origins as an IFA; its dedicated suite of technology tools designed to help IFAs manage their businesses more effectively; its trusted brand and reach across Brazil; and its proprietary market information, which can help IFAs reach and sell their services to customers more effectively.

Technology

The company has developed a powerful, integrated suite of data-driven technology systems, applications, and development resources that enable it to differentiate XP in the market, manage all of its solutions, conduct all of its activities.

XP Genius Platform

The company’s core technology is XP Genius, which is an integrated, cloud-based technology platform with a modular architecture that is highly scalable and secure, and hosted in two fully redundant hot site data centers that operate with real time data synchronization. XP Genius enables the company to:

connect its various systems, micro-services, technologies and environments, enabling it to expand its capabilities modularly, while maintaining an efficient architecture and software code base;

power its solutions and applications across its organization with integrated data harmonized code;

manage its large, valuable and rapidly growing central database of proprietary data with the ability to access information in its data lake in real time;

conduct its big data analytics and artificial intelligence initiatives, such as its online customer behavior monitoring and its machine learning techniques to identify deviations in customer information; and

provide it with proprietary information and market insights from across its integrated ecosystem.

XP Innovation Development Teams

The company has also built a dedicated innovation development program, called XP Innovation. These dedicated technology resources develop and support the company’s solutions by using agile software development methods and leveraging its significant technology and data assets. These include XP Tribes, comprising two to three managers each, that help guide and support the company’s development priorities across numerous projects, and XP Squads, comprising autonomous integrated teams of eight to ten people, including a product owner and business expert, a UX specialist, a technology leader and several developers, that collaborate to create new technologies and solutions or improve its current offerings. These teams focus on the complete customer experience, conducting client interviews, prototyping, behavior analysis and user tests. One of the most visible external examples of the company’s technology capabilities is the suite of technology applications that it provides to its clients and partners. The company’s technology evolution was followed by a deeper and broader corporate transformation process, which involved the creation of business units and integrated its front-office to its foundations – back-office, middle-office and innovation teams.

XP Technology Apps

The company complements and enrichs its XP Advisory services and XP Platform of products by developing and offering a differentiated suite of proprietary XP Apps, including cloud-based and mobile technology applications and tools, that are designed to be powerful, yet simple, attractive, and easy to use, with sleek user interfaces, or UX, that are comparable to the look and convenience of some of the top consumer technology products in the world. The company combines some of the powerful technical capabilities of XP Genius, with the large amount of proprietary data that flows through its systems, and the agile software development methods of its technology innovation XP Tribes and XP Squads to generate functionality and market insights that are value-added for its clients. As a result, XP Apps enable users to incorporate a range of activities across their customer experience journeys, such as managing their accounts, executing trades, performing custom analytics and creating custom reports.

Bull

Bull is the company’s free, cloud-based trading platform designed for retail and institutional traders, that includes powerful data visualization, custom simulations, analytics, and advance graphics tools that can be used from any internet connected device, such as a desktop, tablet, mobile phone and smart watch. The user can analyze the main flows of the market, time and schedule trades, and conduct various forms of charting and volume and pricing analysis. In addition, the user has access to several trading tools, such as Chart Trading and DOM, that can be used to run various market and performance simulations and execute trading quickly and efficiently.

Rede

Rede is an IFA management solution application developed for a desktop environment, that was designed to help an IFA run its business. It provides a comprehensive suite of CRM, account management and investing tools that enable IFAs to access their customer’s information; manage their customer relationships; monitor their clients’ financial activity; develop the best investment strategies for their clients based on key performance metrics; and communicate with clients across a range of platforms.

HUB

HUB is an IFA management solution application, similar to Rede, but designed to help an IFA run its business on-the-go through a mobile application. HUB also provides a comprehensive suite of tools for IFAs that enable them to access client information in real time; (2) manage their CRM application and organize their schedules and meetings on the go; monitor client activity, net funding and upcoming maturities; quickly define and chart investment strategies remotely; and communicate with clients across a range of platforms and third-party applications.

WebCambio

WebCambio a customized digital wire transfer application that provides the company’s clients with foreign exchange and remittance services. This platform integrates with the best automation services in the market, offers online FX quotes and closing prices; convenient transaction controls; transparent transaction and tax calculations; fast currency settlement; simplified contract signing; and integration with XP account equity guarantees and other benefits.

XP Mobile

XP Mobile is a suite of mobile apps for various XP websites, including XP Investimentos, Clear and Rico, available in the Apple App Store and Google Play store. In these stores, XP Investimentos, Rico and Clear apps had quality ratings respectively of 4.4, 3.7 and 4.0 in the Google Play Store and 4.8, 4.7 and 4.3 in the Apple Store as of December 31, 2022.

Regarding XP Investimentos, in December 2022, 80% of the company’s active clients logged in the platform exclusively through its apps, 16% through both its websites and apps, and 4% only through its websites. In the same period, clients logged in through the company’s apps an average of 19 times while clients who logged in exclusively through its websites averaged 4 times.

Regarding Rico, in December 2022, 79% of the company’s active clients logged in the platform exclusively through its apps, 19% through both its websites and apps, and 2% only through its websites. In the same period, clients logged in through its apps an average of 5 times while clients who logged in exclusively through its websites averaged 6 times.

Regarding Clear, in December 2022, 65% of its active clients logged in the platform exclusively through its apps, 12% through both its websites and apps, and 22% only through its websites. In the same period, clients logged in through its apps an average of 13 times while clients who logged in exclusively through its websites averaged 11 times.

XTAGE

XP intends for the creation of XTAGE to be a key milestone in democratizing access to the digital assets market in Brazil. Built on Nasdaq’s leading trading technology, the platform started rolling out to select individual customers in July 2022, all of whom are domiciled in Brazil (and who can only access the platform subject to the satisfaction of certain KYC requirements, in accordance with industry practices and applicable Brazilian legislation, including a self-certification that they are non-U.S. persons).

In 2022, the company rolled out the trading platform to 19,000 individual customers. The company provides access to the trading platform directly in the existing XP technology applications, giving customers direct access to their digital assets portfolio and providing a frictionless process for them to invest through the XP app. Marketing around these launch efforts is entirely in Brazilian Portuguese and are not directed at U.S. Persons. For its marketing to existing XTAGE customers, XTAGE uses email, in-app notifications and push notifications. To drive new traffic to the platform, XTAGE uses a variety of marketing tools, including third party tools. XTAGE’s marketing mainly targets retail customers in different ways and with different campaigns. The company’s revenues generated from XTAGE represented less than 0.1% of its total revenue and income for 2022. XTAGE generates revenues from the XTAGE platform by charging fees for each transaction. The fees are a fixed percentage of the Brazilian Real value of each transaction. Certain customers and market makers pay discounted fees based on their level of activity on the platform.

The new platform offers only trading in bitcoin, ether, matic and link. The company’s customers are required to fund their accounts in Brazilian reais so they can then use those funds on its XTAGE platform to purchase digital assets. Similarly, when customers wish to withdraw funds from XTAGE, they are required to sell their digital assets and transfer out the available balance in Brazilian reais. XP plans to expand XTAGE’s offering to include additional types of digital assets and services, such as access to third party trading platforms and the transfer of crypto assets to and from its customers’ accounts with XTAGE, as market trends and investor appetite continue to evolve, pursuant to its existing policies and procedures on the legal and regulatory permissibility of making any particular digital asset available on the new platform. These policies and procedures include whether a particular digital asset that the company intends to make available on the new platform is a security (valor mobiliário) under Law No. 6,385/1976 and therefore subject to the jurisdiction and regulation of the Brazilian Securities and Exchange Commission (Comissão de Valores Mobiliários), or CVM.

The company has in place policies and procedures that it uses to analyze whether a particular digital asset should be treated as a security (valor mobiliário) for purposes of Brazilian law. Under these policies and procedures, the company also evaluates public information about the particular digital asset and the CVM’s interpretation of the Howey test that the CVM uses to determine whether a collective investment contract is as a security, pursuant to Law No. 6,385/1976. The company’s legal department classifies each digital asset under consideration as low, medium or high risk of being considered a security in Brazil. Even if the company determines that there is a low risk of a particular digital asset being considered a security, the company may still engage outside counsel for their legal analysis in support of such a determination. The company has assessed that all digital assets listed on XTAGE are at low risk of being considered a security under Brazilian law. XP’s analysis is not binding on regulators or court in Brazil.

The company’s onboarding and know your customer (KYC) process is consistent with the process required by Brazilian law for similar financial institutions. When a market maker sells a digital asset to a customer on the XTAGE platform, the market maker delivers that digital asset on-chain to an XTAGE wallet at Parfin. XTAGE then will transfer digital assets from the Parfin wallet to a cold wallet held by BitGo for operational and security purposes such that the composition of digital assets held in warm or cold wallets is approximately 20% in warm to 80% in cold storage. XTAGE anticipates a greater proportion of digital assets being held in cold wallets in the coming months.

In Brazil, only financial institutions authorized by the Brazilian Central Bank (Banco Central do Brasil) may custody Brazilian reais, as only such institutions may transfer Brazilian reais on behalf of another person or entity.

Nasdaq Services Agreements

On September 16, 2021, the company entered into a master services agreement with Nasdaq Technology AB, or Nasdaq AB, for its trading services, or the Trading Platform Agreement; and its market surveillance services, or the Market Surveillance Agreement (and together with the Trading Platform Agreement, the Nasdaq Agreements).

Furthermore, pursuant to the Market Surveillance Agreement, Nasdaq AB has agreed to monitor the company’s marketplace through its proprietary applications, including to provide support services for platform testing and alert analysis and provide reporting services to facilitate the ongoing cloud monitoring of the sale and purchase of digital assets on the XTAGE platform. Nasdaq AB also provides cloud operation tools and related technical support. Pursuant to the Market Surveillance Agreement, the company has agreed to pay to Nasdaq Market Surveillance an onboarding fee, an annual service fee and a variable monthly fee based on the average daily trading volume on the XTAGE platform during the period. The annual service fee is subject to an annual increase.

BitGo Custodial Services

On March 1, 2022, XTAGE entered into a custodial services agreement, the BitGo Agreement, with BitGo Trust Company, Inc., or BitGo. BitGo provides XTAGE with custodial services, including holding digital assets in cold storage controlled and operated by BitGo. In this context, cold storage means that the private keys that permit the transfer of digital assets to another blockchain address are held on a device that is not connected to the internet. As of October 31, 2022, approximately 75% of the digital assets credited to accounts on the XTAGE platform were held by BitGo pursuant to the BitGo Agreement in cold storage, with the remaining 25% held by Parfin subject to the arrangement. The company anticipates a greater proportion of digital assets being held in cold wallets in the coming months.

Under the BitGo Agreement, BitGo must segregate all digital assets received from XTAGE pursuant to the BitGo Agreement from both the property of BitGo and from BitGo’s other customers, maintain a business continuity plan that will support its ability to conduct business in the event of a significant business disruption, maintain specified information security and service level requirements, maintain full and accurate books and records relating to its accounts and its services to it, grant access during normal business hours to it and any regulatory or governmental authority that requires access to such books and records, and use reasonable best efforts to keep in safe custody all digital assets and keys in BitGo’s custody pursuant to the BitGo Agreement, including preventing unauthorized access to, or use of, keys in BitGo’s custody. BitGo provides XTAGE with the on-chain addresses in which it custodies digital assets pursuant to the BitGo Agreement, through which XTAGE can verify transfers to and from the BitGo custody accounts, and the resulting balances in the BitGo custody accounts, on-chain.

As its custodian, BitGo, not XTAGE, holds the private keys that permit the transfer of digital assets held through the XTAGE platform to another blockchain address. Signing a transaction from a cold storage wallet is a rigorous and carefully scrutinized process. The cold storage wallets use keys that are secured offline in purpose-built, Class III bank vaults in undisclosed locations. Each instruction to BitGo to use these keys requires the involvement of multiple individuals (multi-signature) and two forms of identification (two-factor authentication). BitGo may take a longer time to verify security processes for larger transaction instructions. Moreover, BitGo has policies and procedures for changing personnel, restoring systems in the event of local failures and audit logging and access controls.

The service fees charged by BitGo to XTAGE are calculated monthly based on the average U.S. dollar value of XTAGE assets under custody with BitGo. BitGo has agreed to provide statements of accounts to XTAGE at least once per quarter. Furthermore, BitGo has agreed to obtain and maintain insurance coverage from a reputable and substantial insurance company in such types and amounts as are commercially reasonable for BitGo’s services, including insurance against loss or theft of any of the company’s or its customers’ digital assets. Because the inspection rights of BitGo’s insurance providers are provided in BitGo’s agreements with its insurance providers, XTAGE is unaware of any inspection rights held by any insurance providers. XTAGE’s agreements do not provide that information.

Parfin Custodial Services

On April 25, 2022, XTAGE entered into a master services agreement with Parfin Pagamentos Ltda., or Parfin, which is also a third-party digital asset custodian for XTAGE, or the Parfin Agreement.

Some of the digital assets listed on the XTAGE platform are held at Parfin to enable XTAGE to offer its services without the need to frequently access the digital assets XTAGE holds in cold storage at BitGo. These assets are not held in cold storage, but instead in what are generally referred to as warm wallets. As of December 31, 2022, approximately 20% of the digital assets on the XTAGE platform were held by Parfin in warm wallets pursuant to the Parfin Agreement. The Company anticipates a smaller proportion of digital assets being held in these warm wallets in the coming months.

Support Functions

In order to provide, fulfill and support its products, services and platforms, the company has built a robust yet efficient operations organization that leverages its technology to onboard its clients, provide high-quality customer support and conduct its fraud prevention and risk management. These support functions include:

Customer Onboarding

The company’s client onboarding process is primarily a digital experience and highly efficient. Prospective clients must register on a web based platform and enter their basic identification information, such as a name, date of birth and government ID number, as well as their residential address and financial data, such as monthly income and total assets. This process is highly efficient and compliant with Brazilian banking regulation and international anti-money laundering and know-your-customer best practices. All information registered by the company’s prospective clients is verified and validated through third-party data services that integrate automatically with its systems through its API applications.

Customer Support

The company’s customer support organization serves its clients across multiple brands and channels providing support online or by phone through its efficient automated technology tools, client relationship personnel and help desk personnel. The company’s customer support organization professionals are highly trained and have the appropriate market certifications to interact with clients about its financial products and services. The company’s customer support personnel are also encouraged to continue to enhance their training and raise their qualification levels through in-house courses and additional financial certifications.

For customers of its XP-branded services, such as those that reach it through XP Direct or its IFA network, the company provides dedicated support depending on the customer profile. For example, depending on the client profile, the company’s first level of support may be a dedicated advisor, who maintains a close relationship with the client, understands their needs and offers solutions to any questions they have or issues they want to resolve. The company’s second level of support may be its centralized help desk personnel that are available to answer any operational and technical questions about a client’s account via telephone, chat and email. For customers of its Rico and Clear branded online services, the company’s first level of support may be its automated technology tools, such as its self-help tools and chatbots. The company’s second level of support may be its specialized help desk personnel, who can be reached online, through email and dedicated communication tools, such as online chats and a dedicated WhatsApp application, as well as via telephone.

The company closely measures its clients’ satisfaction and overall happiness with its services, across all of its brands, through quality indicators and surveys such as NPS and CSAT. These metrics are directly linked with the company’s internal customer support personnel evaluation and compensation. The company is also highly focused on delivering a highly positive overall client experience and intend to continue investing in this area. The company has a specific team of professionals that are dedicated to coordinating client experience improvement projects across each point of customer contact throughout it.

Fraud Prevention and Risk Management

The company’s fraud prevention and risk management operations are primarily managed by three different groups that are staffed with more than 101 employees dedicated to auditing and mitigating its company risk exposure. This team is composed of highly qualified personnel that come from a variety of backgrounds in other areas, such as telecommunications, credit card issuing, merchant acquiring, banking and the stock market. They are completely independent from the company’s business functions and report directly to its Chief Risk Officer. These groups include:

Corporate Risk – this group focuses on identifying, classifying and mitigating operational, reputational, environmental and strategic risks, including any potential internal fraud;

Financial Risk – this group focuses on monitoring the company’s financial positions and managing its exposure to liquidity risk, market risk, and credit risk; and

Fraud Prevention – this group consist of fraud experts, data scientist, database administrators, investigators and regulator staff, who focus on managing the company’s antifraud strategy and ensuring the legitimacy of client transactions; their work entails detecting and preventing potential external fraud with different models of client authentication, such as user logins; managing its transaction verification services; monitoring financial advisors activities; employee and partner fingerprinting; managing its data tokenization and token management technology; and managing the company’s biometric facial recognition technology, among others.

Seasonality

The company has experienced in the past, and expects to continue to experience, seasonal fluctuations in its revenues. Historically, the company’s revenues have been strongest during the second and the last quarter of each year (year ended December 31, 2022) as a result of performance fees of mutual funds from both its own asset management business, as well as third-party funds distributed through its platform. The company also impacted by the number of business days in each quarter, which affects its trading and brokerage businesses.

Intellectual Property

The company owns a number of trademarks, including XP, XP Investimentos, XP Private, RICO CORRETORA, CLEAR CORRETORA DE VALORES, INFOMONEY and TECFINANCE, as well as XP Inc, in the United States, and other valuable trademarks and designs covering various brands, products, programs and services, including EXPERT CONVENÇÃO NACIONAL XP INVESTIMENTOS. The company also owns a number of domain names registered in Brazil, including xp.com.br, leadr.com.br, rico.com.br, clear.com.br and infomoney.com.br, and abroad, such as xpi.us. As of December 31, 2022, the company held a 29.26% equity interest in O Primo Rico Midia, Educacional e Participações Ltda., with the remaining interest held by its partner, Thiago Lolkus Nigro, which owns the trademark PRIMO RICO.

Competition

The company’s primary competitors include traditional financial institutions, including Itaú Unibanco S.A., Bradesco, Caixa Economica Federal, Banco do Brasil S.A., and Santander. Its other competitors include other financial services companies, such as Nubank, Banco Inter, BTG Pactual and Guide.

Regulation

Three of the company’s subsidiaries, XP CCTVM, Banco XP S.A., or Banco XP, and XP DTVM perform activities that are subject to regulation in Brazil by the Central Bank. As required by the applicable Brazilian regulation, they must possess authorizations from the Central Bank in order to operate, as follows:

XP CCTVM is authorized by the Central Bank to be constituted and operate as a securities broker; carry out operations in the foreign exchange market; and receive direct or indirect foreign investments of up to 100% of its capital stock.

Banco XP is authorized by the Central Bank to operate as a multi-purpose bank.

XP DTVM is authorized by the Central Bank to, among other activities, carry out public offering and distribution of bonds and securities, provide securities portfolio management services and carry out operations in the foreign exchange market.

Seven of the company’s subsidiaries, XP CCTVM, XP DTVM, XP Gestão, XP Advisory, XP Vista, XP PE and XP Allocation perform activities that are subject to regulation in Brazil by the CVM. As required by the applicable Brazilian regulation, they are authorized to operate by the CVM, as follows:

XP CCTVM is authorized to provide securities broker dealer services, securities portfolio management services (exclusively to its own proprietary portfolio) and securities custody services;

each of XP DTVM, XP Gestão, XP Advisory, XP Vista, XP Allocation and XP PE are authorized to provide securities portfolio management services.

Two of the company’s subsidiaries, XP Investments and XP Advisory US, Inc., or XP Advisory US, perform activities that require registration with and regulation by appropriate regulatory authorities in the United States, as follows:

XP Investments is registered as a securities broker-dealer with the SEC and in twenty-six U.S. states and territories; registered with the U.S. Commodity Futures Trading Commission, or the CFTC, as an introducing broker; and a member of the Financial Industry Regulatory Authority, or FINRA, and the National Futures Association, or the NFA, self-regulatory organizations overseen by the SEC and the CFTC, respectively; and

XP Advisory US became registered as an investment adviser with the SEC on January 30, 2019. XP Advisory US was previously registered as an investment adviser in the state of Florida.

One of the company’s subsidiaries, XP Private Holding UK Ltd., or XP Private UK, performs advisory services as an appointed representative acting as an agent for New Europe Advisers Ltd., or NEA, which is duly authorized and regulated by the Financial Conduct Authority, or FCA, subject to the terms and conditions set forth in the Appointed Representative Agreement signed on April 28, 2016. On June 28, 2019, the company sent a notice of termination of the Appointed Representative Agreement to New Europe Advisers Ltd., which became effective on September 30, 2019, in order to concentrate the company’s efforts in the private and wealth management business in Switzerland through its Swiss subsidiary, XP Private (Europe) SA.

One of the company’s subsidiaries, XP Investments UK LLP, performs activities that are subject to regulation by the Financial Conduct Authority. As required by the applicable regulation, it is authorized and regulated by the FCA and has sufficient permissions to carry out its business, including operating as an Organized Trading Facility, or OTF.

Two of the company’s subsidiaries, XP Corretora de Seguros Ltda., or XP CS, and XP VP, perform activities that are subject to regulation by SUSEP. As required by the applicable regulation, both have obtained authorizations to operate from SUSEP, as follows:

XP CS, the company’s insurance broker-dealer, is authorized to operate as an insurance brokerage; and

XP VP, the company’s insurance company, is authorized to operate life insurance and private retirement plans.

The company’s main subsidiaries in Brazil are subject to extensive regulation, such as those applicable to banks (in the case of Banco XP), securities and foreign exchange brokers (in the case of XP CCTVM), securities portfolio managers (in the case of XP Gestão, XP Advisory, XP PE, XP Allocation Asset Management Ltda. and XP Vista), insurance companies and insurance brokers (in the case of XP VP and XP CS, respectively).

The company offers various financial and capital markets services; in particular, it conducts activities related to banking, underwriting, brokerage services, portfolio management and insurance.

XP Gestão, XP Advisory, XP Vista, XP PE Gestão de Recursos Ltda., XP Allocation Asset Management Ltda. and XP LT are asset managers licensed to operate by, and subject to the rules and oversight of, the CVM, pursuant to Law No. 6,385/76 and CVM Resolution No. 21 of February 25, 2021, as amended, or CVM Resolution No. 21.

SUSEP is an independent agency in charge of implementing and conducting the policies established by CNSP and the supervision of the insurance, coinsurance, retrocession, capitalization, supplementary retirement schemes and brokerage. SUSEP neither regulates nor supervises (1) the supplementary retirement entities that are regulated by the SPC; and the operators of private healthcare assistance plans, which are regulated by ANS. With the enactment of Supplementary Law No. 126 on January 15, 2007, the CNSP and SUSEP are also responsible for the regulation of the Brazilian reinsurance market.

CNSP is made up of one representative of each one of the following bodies: Ministry of Social Security, the Central Bank, Ministry of Economy, Ministry of Justice, the CVM and the superintendent of SUSEP — Private Insurance Authority.

Insurance brokerage firms such as XP CS must obtain SUSEP registration and authorization for their operations, pursuant to the rules in force and in accordance with Law No. 4,594 of December 29, 1964, as amended, or Law No. 4,594/64 and Decree-Law No. 73/66. The insurance broker, whether an individual or legal entity, is the intermediary legally authorized to solicit and promote insurance contracts accepted by the legislation, between the insurance companies and individuals or public or private legal entities.

Insurance companies such as XP Seguros and XP VP are required to be duly licensed by SUSEP in order to operate in any given insurance field and are subject to the local legal and regulatory framework governing their operations, governance, solvency, products, accounting, actuarial standards and other technical aspects of their business.

XP Investments is registered as a securities broker-dealer with the SEC and in twenty-seven U.S. states and territories, and is a member of FINRA, a self-regulatory organization, or SRO, subject to SEC oversight. Consequently, XP Investments and its personnel are subject to extensive requirements under the Exchange Act, state securities laws and SEC and FINRA rules, including requirements relating to, among other things, sales and trading practices, recordkeeping, anti-money laundering, financial and other reporting, supervision, misuse of material nonpublic information and the conduct and qualifications of certain personnel. XP Investments is also registered with the CFTC as an introducing broker and is a member of the NFA, an SRO that regulates certain CFTC-registrants. CFTC-registered introducing brokers are subject to expansive requirements under the Commodity Exchange Act and CFTC and NFA rules, including requirements relating to, among other things, sales practices, regulatory capital, anti-money laundering, financial reporting, supervision and recordkeeping.

XP Investments UK LLP is registered at New Penderel House, 4th Floor, 283-288 High Holborn, London WC1V 7HP and has 1 Poultry, London EC2R 8EN, United Kingdom as its commercial place of business. XP Investments UK LLP is authorized by the FCA to advise and deal in investments as an arranger since April 10, 2017 and to deal in investments as an agent and principal for eligible counterparties and professional clients since August 1, 2019. XP Private UK used to be an appointed representative of NEA and acted as an agent of NEA, which is duly authorized and regulated by the FCA.

History

XP Inc. was founded in 2001. The company was incorporated in 2019 as a Cayman Islands exempted company.