When it comes to names like "MALM", it's likely incidental.

"Malm" is a a noun with several meanings, most notably "metal ore", but also some (more archaic) meanings like "area with sandy soil" or "city outskirts".

The fact that "Malm" also happens to be a surname is secondary; Swedish has a lot of surnames that are simply ordinary nouns or adjectives. A completely literal "No surnames, ever" rule would probably be quite a bit too restrictive. I suspect that the actual internal rule is "No names that are primarily (or solely) surnames", or something to that effect.