Free market (4) Access to information

For a market to work fairly, the buyers and sellers must have access to relevant and reliable information. If one party has more information than another party, the first party will have an advantage. In some cases, this advantage is acceptable, but in other cases, it would be considered as unfair.

In the stock market, it would be unfair for the people with insider information to be allowed to trade with other people without the same information. Regulations are made to prevent insider trading. Those who break the regulations could be prosecuted as a criminal offence.

In property transactions, the price agreed between the buyer and seller depends on the access to information about the property. Usually, the seller has more information about the property, such as the condition of the property and the existence of any legal liability. It is the duty of the seller to disclose the information to the buyer.

Both parties should also have access to information about the price of recent transactions of similar properties. This allows them to make the reliable assessment of the current market price, so that the agreed price is fair to both parties. If one party has more information, that party will be able to trade at an advantage over the other party.

Sometimes, the party with the information can withhold or mis-represent the information to the other party to get a better price. That is unfair and is taking advantage of the other party.

Where information is not available, the customer may have to rely on the advice of the property agents, who are expected to be more familiar with the market. Unethical agents may take advantage of their customers and give unreliable or dishonest advice. Some may have a conflict of interest, and fail in their duty of giving the best advice to their client.

To prevent unfair trading and unethical conduct of agents, it is best that information should be made easily available to all. For example, for property transactions, it is best for the prices of recent transactions involving similar properties should be made accessible to all parties in a convenient and clear way.

For trading in stocks, the buy and sell prices and recent transactions should be available to all parties to make their price decision.

When a client relies on the advice of a professional, such as a doctor or lawyer, there has to be a code of ethics for the professional to look after the interest of the client, rather than to apply their expert knowledge to take advantage of the client and over-charge for the professional service or to make a hidden profit on a transaction.

It is important for consumers to have access to independent advice, where there is the possibility that the professional may have a conflict of interest.

Tan Kin Lian