Peter Cruddas, the former Tory treasurer, has been cleared of breaching donation laws by the Electoral Commission.
The Commission said they found "no evidence to support the allegations and will not be opening an investigation into the matter".
In their assessment, they examined comments made by Sarah Southern and Peter Cruddas in a meetingon 15 March with Sunday Times journalists, posing as representatives of a fictitious company based in Liechtenstein. The journalists discussed making donations to the Conservative Party.
In order for an offence to be committed under the Political Parties, Elections and Referendums Act (PPERA), the Electoral Commission said that "a real arrangement to assist the making of impermissible donations has to be in place, as opposed to a fictitious one.
"No donations were in fact made and the Commission therefore determined that there had not been a breach of the Political Parties, Elections and Referendums Act 2000 (PPERA)", it concluded.
Lisa Klein, Director of Party and Election Finance at the Electoral Commission, said: “Although we have determined that there has been no breach of PPERA, we will meet with the Conservative Party to discuss issues identified during the course of our assessment. We will also be asking the party for the results of their own internal investigation.
“We will not be opening an investigation into the matter, however the police are assessing whether any other criminal offences, outside the Commission’s remit, have taken place.”
The Commission’s assessment took place as a result of articles being published in the Sunday Times and a complaint being made by the lobbyist Mark Adams. MP Jack Straw made a subsequent complaint too.