Weiss Ratings Inc. reports that most brokerage firms are continuing to recommend failing companies. Its research found that 47 out of 50 brokerage firms that cover companies that have gone bankrupt this year, continued to recommend that investors buy or hold shares in these companies even as they were filing for Chapter 11.

Lehman Brothers maintained six “buy” ratings on failing companies, while Salomon Smith Barney maintained eight “hold” ratings up through the date the companies filed for bankruptcy, according to Weiss. Also sticking with “buy” ratings until the very end were Bank of America Securities, Bear Stearns, CIBC World Markets, Dresdner Kleinwort Wasserstein, Goldman Sachs, and Prudential Securities.

Only three firms – Credit Agricole Indosuez Cheuvreux, Edward Jones and HSBC Securities – avoided issuing positive ratings on failing companies, while at the same time, taking the initiative to warn investors of trouble with at least one “sell” rating. Another five – A. G. Edwards, Credit Lyonnais, Merrill Lynch, Prudential Securities, and U.S. Bancorp Piper Jaffray – issued “sell” ratings by the date of the bankruptcy filing, but also maintained at least one positive rating on other bankrupt companies.

Each brokerage firm rated only some of the bankrupt companies. In some cases, the brokerage firms published new positive ratings on the companies soon before the bankruptcy filing. In other situations, the firms simply kept their earlier ratings in circulation, neglecting to inform the public that their opinions on the companies may have changed or that they had ceased coverage of the companies.

“This analysis shows that Wall Street’s record is far worse than previously believed,” says Martin Weiss, chairman of Weiss Ratings. “Even when there was abundant evidence that companies were on the verge of bankruptcy, over 90% of the latest ratings issued by brokerage firms continued to tell investors to hold their shares or buy more.”