Kansas Bank Commissioner David Herndon told the Joint Committee on Fiduciary Financial Institutions Oversight on Nov. 7, 2025, that his offices examination of Beneficient Fiduciary Financial (BFF) found "significant and repeated" violations of Kansas banking statutes and the TEFI Act and that a formal corrective action is being proposed and will be delivered to BFFs board "today or tomorrow." The report of examination, Herndon said, is confidential under KSA 9-17-12(a), but he disclosed the scope and the regulatory outcome.

Herndon said the OSBC conducted an on-site examination of BFF on July 23, 2025, held an exit meeting with BFFs board, and delivered a final, confidential report to the board on Oct. 22. Because of the volume and severity of cited violations, OSBC intends to institute a continuous examination cycle for BFF and is proposing a consent/ corrective action to address governance, compliance and safety-and-soundness concerns.

Items Herndon listed as causes for concern included lack of corporate oversight and governance by the board, frequent leadership changes, failure or unwillingness to comply with Kansas statutes and regulations (chapter 9 and the TEFI Act), a limited number of completed transactions, a pattern of operating losses, and ongoing legal challenges. He also flagged external indicators he said increased his concern since July: late SEC filings by Beneficient (the public parent), a low stock price that triggered a Nasdaq delisting notice, claims by former employees alleging unpaid wages, and the recent federal indictment and arrest of Beneficients founder and former CEO.

Herndon specifically referenced a five-count indictment filed in the U.S. District Court for the Southern District of New York that includes allegations of securities fraud, wire fraud, conspiracy, false statements to auditors and falsification of records. The indictment alleges the conduct caused investor losses in excess of $1 billion, although Herndon said he did not know how many investors were Kansas residents. He reiterated that these are allegations and that the former CEO is entitled to due process.

On consequences and next steps, Herndon described OSBCs typical enforcement sequence: (1) a board resolution noting findings and asking the board to cure deficiencies, (2) a memorandum of understanding if issues remain, (3) a negotiated consent order (a public document), and (4) if unresolved, a cease-and-desist order and possible charter revocation. He said the consent order OSBC plans to issue will be negotiated with BFFs board; if negotiations fail the office can issue a cease-and-desist and pursue revocation.

Why it matters: Herndon said the examination and proposed corrective action signal that BFF must materially improve to continue as a regulated entity in Kansas. He cautioned that the OSBC lacks authority to perform the same safety-and-soundness examination it would apply to a typical bank because the TEFI Act constrains certain powers and disclosure. Committee members asked whether that statutory framing, and the lack of TEFI-specific regulations to date, hampered OSBCs ability to oversee the entity.

The committee voted later in the hearing to encourage the OSBC to adopt rules and regulations necessary to administer the TEFI Act and also directed staff to draft legislation that would allow the OSBC to revoke a TEFI charter (with an appeal process to be defined). Those committee recommendations are recorded in the committees minutes and were approved by the joint panel.

Provenance: Commissioner Herndons summary of the exam began in committee testimony starting at 00:04:33 and continued through the OSBC Q&A (00:06:2400:10:19). Evidence excerpts: "I also told you in July that my office had conducted an examination on BFF on 07/23/2025... final report of examination being prepared and delivered to BFF's board of directors on October 22." (transcript excerpt).

Sources and speakers: Testimony by David Herndon, Kansas Bank Commissioner; questions from committee members (Senators Owens, Francisco, Feck, and representatives). The OSBC also provided fund- and exam-related figures during questioning.

Ending note: OSBC said the consent order will be public if delivered and that future examinations will be scheduled; the committee asked the office to accelerate rulemaking and oversight work so the legislature has options in the upcoming session.