A top U.S. securities regulator today called for her agency to beef up its capital requirements for brokerages, saying current rules fall short and do not protect markets if a large firm fails.

"Given the systemic risks posed by some of the firms we regulate, I think it’s about time for the SEC to revise its reasoning for imposing capital requirements," said Kara Stein, a Democratic member of the Securities and Exchange Commission, in prepared remarks.

Stein's call for tougher broker capital rules is likely to spark a debate in Washington, both at the SEC and potentially among the members of the Financial Stability Oversight Council (FSOC) - a body of regulators that polices the market for systemic risk.

The FSOC, which is chaired by the Treasury Secretary, has been closely monitoring whether certain firms regulated by the SEC could pose broader systemic risks, and should be "designated" for additional regulations and oversight by the Federal Reserve.

The group has mostly focused its attention in the past year on large asset managers.

However, a recent FSOC annual report also outlined possible risks posed by broker-dealers, particularly in the area of securities lending and the role they play in the short-term funding and tri-party repo market.

The SEC serves as the primary regulator for broker-dealers. Both the SEC, and the Wall Street-funded Financial Industry Regulatory Authority, are responsible for inspecting them for compliance and ensuring they are abiding by net capital rules.

Historically, the SEC's capital rule approach to regulation, however, has been very different from the capital regime for banks.

Bank capital rules are generally designed to reduce risk, protect against losses and improve safety and soundness.

Net capital rules for brokerages, however, are more geared toward risk-management, so that if a brokerage fails, it can be liquidated and customers' money can be transferred to another firm.

But Stein questioned this model in a post-financial crisis world. And she was also critical of 2004 SEC reforms which allowed the largest brokerages to rely on their own risk modeling to calculate their capital.

"When we let broker-dealers use their own models, what do you think happened? You guessed it. The models led to less capital," she said.

She also said it was high time to establish "meaningful minimum haircuts" for all types of securities lending and repos, noting that even high-quality assets could pose risks.

Stein's remarks, delivered at the Peterson Institute for International Economics, were part of a wide-ranging speech about systemic risks to the marketplace.

In it, she also criticized the ongoing turf battles between the SEC, the FSOC and the FSOC's research arm.

Since last year, some staff at the regulator have clashed with the FSOC over its focus on asset managers and the quality of the research into whether large fund managers pose systemic risks.