The National Securities Clearing Corp. says it wants to automate the process of transferring funds from one investment option to another inside a variable insurance product contract.

The NSCC has filed a rule change notice concerning the fund transfer automation feature with the U.S. Securities and Exchange Commission.

The rule change took place June 19, but the SEC has a right to cancel the change if it believes the change would cause problems for investors or members of the general public.

The NSCC, a unit of the Depository Trust & Clearing Corp., New York, helps run the infrastructure that supports broker-to-broker stock, bond and mutual fund trades in the United States.

The NSCC also provides information and money settlement services for mutual fund, variable life insurance and variable annuity transactions.

The new fund transfer feature would be part of the In-Force Transactions service within the NSCC’s Insurance and Retirement Processing Service, according to the notice filed with the SEC.

The processing service, known as IPS, already connects insurers with broker-dealers, banks and insurance agencies.

The fund transfer feature is the product of a 3-year-old effort to automate and standardize in-force policy transactions, the NSCC says in the SEC notice.

“The automation of in-force policy transactions is consistent with the insurance industry’s straight through processing objectives,” the NSCC says.

The new system would give a distributor the ability to transmit a request for a fund transfer to an insurer.

The system would give the distributor a current “snapshot” of the contract, to help the distributor apply suitability rules and other compliance rules.

Both the distributor and the insurer would have a chance to review the request, the NSCC says.

An insurer could send the distributor a success message or a failure message, and the distributor could send a cancellation request, the NSCC says.

“The insurance company can accept the cancellation request, or it can reject it (if, for example, the insurance company does not allow the cancellation under the reject reason code provided by the distributor),” the NSCC says.

The NSCC says the automated system would replace current fund transfer systems, which tend to rely on telephone calls, facsimile transmissions, electronic mail messages, and a variety of proprietary Web-based systems.

The IPS fund transfer system should be faster and better centralized, and it should be easier for insurers and distributors to use the system to monitor compliance with regulatory requirements, the NSCC says.

The SEC is asking for comments on the rule change.