The Securities and Exchange Commission is closing in on an issue of tremendous importance to investors: forcing mutual funds to be more open about the fees and commissions they charge.

It was three years ago that the SEC first proposed full and simplified cost disclosure. In the beginning, much of the industry fought it tooth and nail. Now, mutual-fund managements appear to be resigned to a reform.

The proposal requires mutual funds to gather up all the information on fees (which at present is larded throughout the prospectus) and disclose it to investors in a single place.

With any luck, the rule will take effect in 1988. You'll get a straightforward table listing any up-front sales commissions, the notorious hidden sales charges (known technically as 12{b}1 fees), fees when the fund is sold or redeemed, fees for switching to another fund, management and advisory fees, and any other expenses.

With this information, you will be able to do three things: Compare costs, to find out whether your fund is charging more than the industry average; avoid higher-cost funds, especially income funds, where fees can make a significant difference to performance; and run a truth check on your broker or financial planner, who may falsely imply that the fund you're buying has no sales fees.

Truth checks are needed on funds that appear to be "no loads" (no sales commission), but in fact have commissions buried in their structure. Under a hidden-load 12(b)1 plan, a mutual fund takes a portion of its investors' assets every year and distributes it to the brokers and financial planners who make the sales. It may also skim some money for other purposes.

Unlike the up-front sales charge,which is levied once, a 12(b)1 load is taken out of your investment every single year. It's a percentage of the fund's assets (anywhere from 0.1 to 1.25 percent), so it grows as the fund does. The longer you hold, the more you pay.

Needless to say, the no-load fund industry -- that is, the true no-load industry, which charges no hidden commissions -- is 100 percent behind full disclosure. Right now, "people just see NL {for no-load} in the newspaper after a fund's name, and they don't notice these other charges," said Laura Berger, executive director of the No-Load Mutual Fund Association.

The SEC also wants mutual funds to publish a hypothetical example, showing the effect of their fees on a sample investment, in dollars and cents. To this, the industry is objecting loudly.

But although the SEC's proposed tables can be improved, the regulators are definitely on the right track. An expense stated only in percentage terms can sound low, when it might be biting substantially into your profits. Only a dollars-and-cents example demonstrates what's really going on.

In his newsletter, Income & Safety, Norman Fosback gives the following example for the Thomson McKinnon Tax-Exempt fund, which levies a 5 percent redemption fee (decreasing 1 percentage point a year over five years) plus an annual 1 percent hidden load. The expense ratio (costs divided into assets) comes to 1.8 percent annually. Assuming a 5 percent return on $1,000 invested, he says, you'd get a $146 profit over five years, after paying $130 in expenses. Pretty bad.

The SEC proposal still fails to touch some important bases. Here's the cost disclosure that still needs to be added:

Whether sales charges are levied on your reinvested dividends. Investors rarely realize that this outrage might be practiced on them.

Estimated costs for new mutual funds. "That's where the abuse of costs is coming from," says John Bogle, head of the low-cost Vanguard Group. New funds sometimes artificially limit their costs in the first year, so investors wouldn't get a true picture of what they'd be charged in the future.

Cost disclosure in advertising brochures. Many investors never read the prospectuses, and there is no control over what they're told by stockbrokers and financial planners. If the SEC doesn't mandate truth-telling in the sales material, it will never happen.