The co-founder of TalkTalk firm Carphone Warehouse resigned today after failing to declare the use of his shares as backing against personal loans.
David Ross, who owns almost a fifth of the company, told Carphone yesterday he used 136.4 million of his shares as security between 2006 and 2008.
Under Financial Services Authority (FSA) regulations, he was obliged to have made public the fact that he had used his shares in this way.
Mr Ross said none of the loans was in default and stressed he had no intention of selling his holding.
Carphone said Mr Ross had committed to "facilitate an orderly market" for any future sale of his shares, although the company's stock fell 5% today.
Chief executive Charles Dunstone, who went to school with Mr Ross, said his departure was a "sad occasion" and the board had reluctantly accepted his resignation.
He said he thought Mr Ross's failure to notify the company was an oversight.
Mr Ross's departure comes after Carphone warned that next year would be the most challenging economic climate ever faced by the firm.
The group posted interim profits of £39 million for the 26 weeks to September 27, compared with £44 million in the same period last year.
Last month the company said it was mulling over plans to split its TalkTalk broadband arm from its retail business.
Mr Dunstone said the firm had reached a "watershed" with two distinct businesses and announced plans to review the corporate structure.
TalkTalk was launched in 2003 and has 2.8 million customers, making it the UK's third largest broadband provider. The potential sale is likely to attract interest from major players such as Vodafone, according to analysts.
The move comes six months after Carphone sold a 50% stake in its retail business to US electronics firm Best Buy for £1.1 billion as it looks to enter the European market for the first time.
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