According to FINRA, Kenneth John Malm of Suffern, New York was assessed a deferred fine of $10,000 and suspended from association with any FINRA member in all capacities for seven months for accepting a bequest from a customer's estate without providing written notice to his firm or receiving approval.

After a customer's death, Malm learned he was named as a beneficiary of her estate and stood to inherit more than $1 million. The customer was not a member of Malm's immediate family. Nonetheless, Malm accepted and received the bequest.

FINRA rules require registered persons to provide written notice before accepting bequests from customers who are not immediate family members and to receive firm approval before accepting such bequests. These rules exist to prevent conflicts of interest and potential elder financial exploitation.

When a broker stands to inherit from a customer, it creates obvious conflicts. The broker may have incentives to encourage the customer to maintain or increase the bequest, which could influence recommendations and account management. Even if no improper influence occurred, accepting such a bequest without disclosure prevents firms from evaluating whether the relationship was appropriate.

Bequests to non-family members can also be evidence of undue influence over an elderly or vulnerable customer. Firms need to know about such arrangements to assess whether customers are being exploited.

The substantial amount of the bequest—more than $1 million—and Malm's failure to notify his firm resulted in a seven-month suspension.

The suspension is in effect from June 2, 2025, through January 1, 2026.

Families of elderly investors should be aware of their relatives' relationships with their brokers and alert to signs that a broker may be positioning themselves to receive benefits from the customer's estate.