Michael N. Delune, Esq. 

Aldrich & Bonnefin 

Box 19686 

Irvine, CA 92623-1029 

Dear Mr. Delune: 

BOARD OF GOVERNORS 

OF'THE 

FEDERAL RESERVE SYSTEM 

WASHINGTON, O. Co 20551 

May 10, 2010 

SCOTT G. ALVAREZ 

GENERAL COUNSEL 

This is in response to your letter regarding whether a proposed assignment 

of an economic interest in the partnership interests of a partnership that is a 

qualified family partnership ("QFP") under section 2(0)(10) of the Bank Holding 

Company Act ("BHC Act") would cause the partnership to lose its status as a 

QFP.l 

C ] a QFP under the BHC Act, indirectly 

controls [ J("( JBank")? 

One of the partners of( J is the r .. ::l Trust ("Trust"). 

t ], a Trust beneficiary, has passed away, and you have inquired as to 

whether the assignment of an economic interest in t J 

interests that are held by the Trust to a third party who is not a related family 

member would cause [ J to lose its status as a QFP. You have indicated that 

such an assignment would not include the voting interests in such!: ] 

partnership interests. 

1 12 U.S.C. § 1841(0)(10). 

2 [ 

J 
2 

Under the BRC Act, any "company" (including a partnership) that controls a 

bank is considered a BRC.3 The BRC Act, however, provides a limited exemption 

from the definition of company for a QFP, and accordingly a partnership that 

qualifies as a QFP is not considered a BRC under the BRC Act.4 In order to 

qualify under the BRC Act as a QFP, all the partners of a QFP must be 

"individuals related to each other by blood, marriage ... or adoption" or "trusts for 

the primary benefit of' such individuals (collectively, "qualified parties"). This 

exemption requires the QFP to control its bank investments through a single bank 

holding company that remains subject to the BRC Act. Under the exemption, a 

QFP is able to own and control a bank holding company without the partnership 

becoming subject to the registration, source of strength, approval, reporting, or 

other requirements imposed on a bank holding company. 

The QFP exemption, however, does not distinguish between the legal and 

beneficial ownership of such partnership interest. An assignment of the economic 

interests in a QFP interest, especially in the case of a limited partnership interest, 

would effectively give the assignee a beneficial interest in the QFP. Where the 

assignee is not a family member, staff believes that such an assignment would 

undermine the "family relationship" requirement of the BRC Act and would 

expand the exemption beyond its limited scope. Accordingly, staff believes that an 

assignment of the economic interests in the partnership interest of QFP to a 

non-qualified person would be inconsistent with the "relationship" requirement of 

the statute, and the partnership would not be in compliance with the statutory 

requirements of a QFP. 

3 12 U.S.C. § 184l(a)(1). 

4 12 U.S.C. § 1841(b). The QFP (1) cannot incur debt, either as principal or 

guarantor, (2) cannot engage in any business activity except indirectly through 

ownership of other business entities and (3) must limit its investments to those 

permitted for a bank holding company under section 4 ofthe BRC Act. The QFP 

also must commit to examination by the Board and to the notice requirements of 

the Change in Bank Control Act if it acquires an additional bank. 
3 

If you have any further questions, please contact Pamela G. Nardolilli of my 

staff at 202/452-3289. 

Sincerely, 

loti-h. 

cc: Gerry Tsai, Esq. 

Federal Reserve Bank of San Francisco