SEC Commissioner Daniel Gallagher wrote a comment letter to the SEC criticizing the Office of Financial Research (OFR) Asset Management and Financial Stability Report (the “OFR Report”) as “fundamentally flawed.”

The Commissioner’s May 15, 2014 letter noted that as an SEC commissioner, he has “no statutory standing whatsoever” in FSOC’s “misguided debate over whether to designate asset managers as systemically important financial institutions (SIFIs)” and that he chose to submit his own views. The letter joined other commenters on the OFR Report that have “sharply criticized the absence of empirical data underlying the generalizations advanced by the report and the flawed methodology used to analyze systemic risk.”

The Commissioner did not mince words. He characterized FSOC’s SIFI designation process as “pure – and dangerous – folly” and explained that attempts by FSOC and the Financial Stability Board to apply bank regulatory principles to capital markets regulation is a “fatally misguided approach, the regulatory equivalent of trying to jam a square peg into a round hole.”

It looks like the SIFI debate, misguided or not, is likely to continue unabated for some time.