The co-founder of Carphone Warehouse who secretly used his stake in the firm to secure loans has been cleared of law breaking by financial investigators.

The Financial Services Authority (FSA) said today its rules on whether David Ross was required to declare the loan arrangements had been unclear. It added that in future directors must obtain permission from them to use company stock as security.

Ross quit the Carphone Warehouse board in December when it emerged he had secured personal loans against 136.4 million of his 160 million shares without informing the board. He was also forced to quit a plum job as Olympics advisor to London Mayor Boris Johnson, and as chairman of National Express.

The FSA said any director securing personal loans using company stock would in future be required to the board within four days of a deal. The stock market must then be told within a further two days.

"The FSA can see no basis on which a director could legitimately avoid seeking clearance where his or her shares are to be used as collateral for a financing transaction," it said. ®

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