Company Directors are under pressure to reveal shares pledged against loans in the wake of the David Ross affair, with insiders saying the practice is "widespread" across the City. The urgency to disclose mounted as Mr Ross resigned from his fourth post in as many days, and is waiting to learn if his resignation from a fifth is to be accepted.
City sources said companies were feeling the strain. One said: "Directors across London will be nervous. This is seen as a reasonably widespread practice." The source added that a lack of clarity over the rules had led to the practice proliferating.
A stream of disclosures emerged yesterday, including from the Lonmin chief executive, Ian Farmer, who used 32,597 shares as security against a mortgage. A spokesman for the company said Mr Farmer was under no obligation to disclose, but thought it best "for the sake of transparency".
The Financial Services Authority is thought to be looking at whether the rules over the issue need clarifying. The market watchdog has not launched a campaign to root out further offenders, but has emphasised the importance of the rules to companies.
Lawyers said changes to the rules in 2005 had caused confusion. A regulatory expert said: "The model rule is clear over when the practice had to be disclosed. What is not clear is when it becomes market abuse."
David Ross quit as a non-executive director of the self-storage group Big Yellow yesterday. His resignation as chairman of Cosalt, the marine safety company, is expected to be confirmed in the next few days. Nicholas Vetch, the chairman of Big Yellow, said the board had accepted his resignation "with sadness".
Mr Ross offered his resignation from the board of four public companies – the other two were National Express and Carphone Warehouse – at the start of the week. This came after he announced he had failed to disclose pledging shares in all the companies against loans. He called it yesterday an "unintentional technical breach of disclosure rules", and privately believes he has done nothing wrong. He has stepped back to look after his other business interests, which will include managing the shares in question. "There will be no forced sale issues," a spokesman for Mr Ross said. He added Mr Ross is not in default on the loan and his assets "comfortably cover his liabilities at present".Reuse content