WASHINGTON — A Federal Reserve proposal to better regulate foreign banks in the U.S. would also significantly expand the central bank's oversight of foreign broker-dealers, effectively snatching supervisory responsibility from the Securities and Exchange Commission in the process.

The Fed's power grab was one of the most striking aspects of the December proposal, which already represented a large shift in how the central bank plans to supervise foreign banks, and suggested a lack of confidence in the SEC's existing oversight of broker-dealers.

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