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FINRA Dings FA For Benefiting From a Customer’s Estate
Summary: FINRA Disciplinary Action – Kenneth John Malm
On May 20, 2025, FINRA released an AWC for Matter No. 2023078405601.
Background:
- Kenneth John Malm was registered as a General Securities Representative and Investment Banking Representative with Osaic Wealth, Inc. (formerly Securities America, Inc.).
- In August 2024, Malm was permitted to resign during an internal review after being named as a beneficiary of a client’s estate.
- Malm allegedly accepted and received a bequest of over $1 million from a deceased client (not an immediate family member) without notifying or obtaining approval from his firm.
Alleged Violations:
- FINRA Rule 3241: Provides that “[a] registered person shall decline being named a beneficiary of a customer’s estate or receiving a bequest from a customer’s estate upon learning of such status” unless: (a) the customer is an immediate family member; or (b) the representative provides written notice to firm, and the firm (after performing a reasonable assessment of the request) approves the request.
- FINRA Rule 2010: Requires high standards of commercial honor and just and equitable principles of trade.
Sanctions:
- Suspension: 7 months from associating with any FINRA member in any capacity.
- Fine: $10,000, payable upon reassociation with a member firm or before seeking relief from any statutory disqualification.
Additional Notes:
- The matter originated from a tip to the FINRA Securities Helpline for Seniors.
- Malm waived his rights to a hearing, appeal, and other procedural protections by accepting the settlement.
- This action will become part of Malm’s permanent disciplinary record and will be publicly disclosed.
Conclusion:
Malm’s case highlights FINRA’s strict stance on conflicts of interest and the importance of disclosure and firm approval when it comes to bequests from clients. Malm’s alleged failure to follow these rules led to a significant suspension and fine, serving as a warning to other brokers in similar situations.
Herskovits PLLC has a nationwide practice representing individuals and entities faced with FINRA investigations or disciplinary actions. Feel free to contact us at (212) 897-5410.