FINRA Sanctions Advisor for Accepting $1 Million Inheritance from Client Without Firm Approval

Posted on June 27th, 2025 at 12:18 PM
FINRA Sanctions Advisor for Accepting $1 Million Inheritance from Client Without Firm Approval

From the desk of Jim Eccleston at Eccleston Law

FINRA has fined and suspended veteran advisor Kenneth J. Malm for accepting a $1 million inheritance from a client without receiving the necessary firm approval. As reported by the DI Wire, Malm settled the matter without admitting or denying FINRA’s findings.

According to the FINRA Acceptance, Waiver and Consent (“AWC”), Malm learned he had been named a beneficiary of a client’s estate after her passing in 2021. Rather than notifying Securities America and seeking written approval, as required under FINRA Rule 3241, Malm accepted the inheritance. Rule 3241 prohibits advisors from being named as beneficiaries for non-family clients’ estates without firm consent.

FINRA also charged Malm with violating its broad ethical standard, Rule 2010, which requires registered representatives to act with high standards of commercial honor and just and equitable principles of trade. DI Wire reports that the regulator opened its investigation following a tip to its senior helpline.

The settlement imposes a $10,000 fine and a seven-month suspension from associating with any FINRA member firm in all capacities. DI Wire reports that similar cases have surfaced in recent years. Notably, a former Wells Fargo advisor retired in December 2023 amid a FINRA inquiry into a $3 million client gift arrangement.

 

Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.

Tags: eccleston, eccleston law, finra

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