Greed is good, says Michael Douglas, Gordon Gekko in Oliver Stone’s cult classic, Wall Street. Undeniably, the world’s financial markets are based on self-interest, which is why they work so well moving capital around the globe. Money will only go where it can be used profitably--that is, filling a need and thereby increasing the world’s wealth.

Markets work best, however, when the self-interest driving them is enlightened. In other words, there’s a huge difference between decisions made solely to grab a big payday and those based on sound business principles.

Most corporate and market decisions feature elements of both. The key is whether there’s enough enlightened self-interest involved to make the situation worthwhile for more than just a handful of payoff-focused insiders.

A pretty good example of unenlightened greed is the insider trading case reported in a recent Wall Street Journal, involving takeover information collected from investment banking arms of Morgan Stanley and UBS. The Securities and Exchange Commission (SEC) has filed a complaint against 11 people and three trading companies for using the information about prospective deals to get in ahead of the game.

In this case, the perpetrators have been nailed and more than a few will likely go to jail. But it’s a pretty stark reminder of what some Wall Streeters will do when they see the prospect of easy money--regardless of moral or legal implications--if they think they can get away with it.

The case is another stark reminder that greed and corruption didn’t die with the prosecution of Bernie Ebbers, Jeff Skilling and others in the fallout from the Bear Market of 2000-02. The often onerous Sarbanes-Oxley legislation didn’t cure all the ills of the system. In fact, the evidence is growing that unbridled greed--not enlightened self-interest--is again on the rise. In other words, for us small investors, it’s as much a case of buyer beware as ever.