HOWZAT

The FSA could launch a civil investigation into Mr Ross which could take between one month and several years, with punishment ranging from a warning to a heavy fine.

Mr Ross, a qualified accountant, should have notified either the chairman or the chief executive at the companies where he holds positions that he was using his shares as guarantees for personal loans.

Mr Ross is Carphone's second-largest shareholder with 19.4 per cent stake and in May this year was appointed by Boris Johnson, the Mayor of London, to oversee the running of the 2012 Olympics.

The Greater London Authority refused to confirm whether Mr Ross will continue in his Olympics role. An announcement on his future is expected later today.

Shares in Carphone Warehouse fell 5.4 per cent to 88p today, a five-year low, on fears that Mr Ross will now have to sell the shares. However, the group said this morning that Mr Ross had no plans to sell his stock.

Carphone Warehouse said today: "On 7 December 2008, the company received notification from David Ross, a director of the company, that he had, through various agreements between 2006 and 2008 and as part of a package of security comprising other assets of substantial value, pledged 136.4 million ordinary shares in the company against personal loans."

Mr Ross had previously used some of shares in Carphone Warehouse as a guarantee against loans in 2002 and 2003. However, in those instances, he went through the correct procedure, which states that if a director uses his shares in this way, the company has to make an official announcement.

Directors must notify the company in writing of all transactions conducted on their account within four business days and dealing includes using shares as security for loans, according to the FSA's rule book.

The 87th richest man in the UK, according to this year’s Sunday Times Rich List, Mr Ross is worth around £873 million after setting up Carphone Warehouse with Mr Dunstone, a school friend, where he served as chief operating officer between 1990 and 2003.

Commenting on his Olympic appointment earlier this year, Mr Johnson said: “David is one of Britain's leading entrepreneurs and brings years of business experience to the role. Having co-founded one of our most well-known household names and turned it into a huge success, his skills will be vital in helping to deliver the legacy on which the success of the London Games will be judged.”

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