By Brazil Stock Guide – Consumer-protection groups filed a class action lawsuit against XP Inc. (XPBR31) and Banco XP, alleging structural failures in the sale of credit-linked Certificates of Structured Operations, known as COEs. The lawsuit, filed in Porto Alegre, seeks R$100 million (about $20 million) in damages and the immediate suspension of the products. The case escalated after investors reported losses of up to 93% in COEs linked to Ambipar, raising questions over disclosure standards and suitability practices.
The complaint argues that the losses were not the result of ordinary market volatility. Instead, it claims investors were exposed to risks that were not properly described in the official offering documents. According to the filing, Essential Information Documents portrayed corporate debt instruments as “external public debt securities,” language that could suggest sovereign backing and materially alter a retail investor’s perception of risk.
Disclosure and suitability under scrutiny
Lawyers for the plaintiffs say the same wording appeared across multiple COEs distributed by XP. The lawsuit cites products linked to debt issued by Braskem, Cosan, Minerva, FS Luxembourg, Iochpe-Maxion, Aegea Finance and Movida. Attorneys say the documents were obtained directly from XP’s website and attached as evidence, indicating a standardized disclosure model rather than isolated errors.
According to Valor Econômico, Adilson Bolico, a lawyer at Mortari Bolico Advogados, said the case seeks both collective compensation and an independent audit of XP’s structured-products platform. According to him, the brokerage created an “assembly line” of products with quality defects, breaching compliance and suitability duties. Cláudio Pires Ferreira, president of the consumer associations behind the lawsuit, said conservative and moderate investors were steered into high-yield credit risk without clear disclosure of BB-rated issuers or foreign-exchange exposure.
What’s at stake for the market
In a statement to local news, XP said it operates in compliance with applicable regulations and follows “rigorous governance criteria.” The firm said it will review the lawsuit and present its explanations through appropriate legal channels. The case lands at a sensitive moment for Brazil’s structured-products market, which expanded rapidly among retail investors after benchmark interest rates declined.
Data from B3 show annual issuance of COEs exceeds R$40 billion (about $8 billion). The products are often marketed as capital-protected or low-risk alternatives to fixed income, making disclosure standards central to their appeal. A court-ordered suspension or audit could force distributors to revise documents, tighten suitability checks and slow new issuance.
Broader implications
For investors, the lawsuit could strengthen transparency and accountability in structured credit. For brokerages, it raises the risk of higher compliance costs and reputational damage. A ruling against XP would likely ripple across Brazil’s retail investment industry, setting a precedent for how complex credit products are described, sold and supervised in the years ahead.
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