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Report: XP Investimentos to sue BTG Pactual for alleged confidentiality breach

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Report: XP Investimentos to sue BTG Pactual for alleged confidentiality breach

Brazilian payment processor XP Investimentos plans to sue Banco BTG Pactual SA for allegedly breaking a two-year confidentiality agreement signed when the latter was hired as an IPO underwriter, Valor Econômico reported.

According to the newspaper, XP said BTG exploited confidential information accessed at the time to create and promote its own digital investment platform, now a competitor, by replicating the broker's distribution network.

The agreement was reportedly signed in December 2016 when the online broker began structuring the public offering of its shares, though the deal was eventually called off as XP opted to sell a minority share to Itaú Unibanco Holding SA instead, also an underwriter, along with JPMorgan and Morgan Stanley.

BTG, for its part, claimed its digital platform was launched in November 2016, a month before the signing of the confidentiality agreement. "XP does not hold the monopoly of this market and having autonomous agents was part of our project from the beginning," an unnamed source related to the bank reportedly told Valor.

The key to this conflict is the strong network of independent companies that sell investment products available on the XP platform. All of the payment processor's competitors, such as Guide Investimentos SA Corretora de Valores, Genial Corretora de Seguros S/A, Órama Distribuidora de Títulos e Valores Mobiliários SA and BTG itself have reportedly targeted its distribution network while trying to incorporate new agents.

The newspaper claims the dispute shows signs of becoming "fierce." Stress signs in the relationship between both institutions, which were very close years ago, had been mounting lately. According to Valor, in conversations with financial entities to revisit the IPO project in 2019, XP reportedly excluded BTG.

In June, BTG reportedly bought Network Partners, founded by XP's former executives who where responsible for the setting up of the distribution scheme. XP would consider that to be yet another sign of alleged exploitation of confidential information.

However, a source related to the bank said that if they had confidential information, "we would not have to buy a company just because it knows the market of autonomous agents."