FSA clears Ross in Carphone shares row but stresses rules

David Ross, the founder and former deputy chairman of Carphone Warehouse, who was forced to resign last month after he failed to disclose that he had used £130 million of his shares as security against personal loans, is off the hook.

The Financial Services Authority (FSA) today admitted that its rules were not totally clear, and said it would not be taking enforcement action against anyone who had failed to disclose doing what Ross did.

However, it also clarified the rules today and said companies have just a fortnight to declare whether any of their directors had made similar pledges with their shares in the past. In future, all such transactions will not only have to be declared by directors to their companies but also made public to the stock market.

The FSA admitted that it had received "numerous" calls from companies and their lawyers following the Ross affair.

Indeed, later in December, quoted stockbroker Numis revealed that its chairman, Michael Spencer, who also runs Icap, had pledged his shares in the broker against loans to other private businesses. But few other companies have made such declarations.

City lawyers said there was now likely to be a flood of statements from companies revealing that their directors may have used some or all of their shares as collateral against loans.

The FSA said disclosure is a two-part process. Firstly, any director must, under the Model Code, ask for permission to use shares as security, Secondly, once the transaction takes place the director has four days, under Disclosure and Transparency Rules in which to inform the company it has happened, which must then tell the stock market within two days.

Ross was forced to resign not only from Carphone but also as chairman of National Express and as a director of storage company Big Yellow after revelations that he used shares in all three as security against loans.