Following a private meeting this evening, Portsmouth City Council's Liberal Democrat group has said Mike Hancock will retain his seat on the council's cabinet.
He has been forced to stand as an independent councillor as he was suspended as a member of the party yesterday over claims of sexual misconduct, which he denies.
Explaining their decision, the group said: "This was decided because Councillor Hancock is best placed to fulfil the role of cabinet member for planning, regeneration and economic development."
As well as being a local councillor, Mr Hancock is also an MP for Portsmouth South.
ITV News has obtained a recording of the call a woman made to Nick Clegg's office in June 2011 following up on a letter she says she wrote three months earlier detailing allegations of sexual misconduct against the then Lib Dem MP Mike Hancock. He denies the claims against him.
In the call, she is heard saying: "I wrote to Nick Clegg back in March  and again in May and I still haven't had a courtesy letter."
Mr Clegg said today he "acted immediately" last year when he was told legal proceedings were being taken against Mr Hancock, who has been accused of sexual misconduct. He withdrew the party whip.
But the woman's solicitor told ITV News the party was made aware two years earlier, but nothing was done.
In March 2011, the alleged victim says she wrote a letter sent by recorded delivery to the Lib Dem leader's office. The party say they did not receive it.
Master Leslie, a High Court official, ruled disclosure of a report into councillor and former Lib Dem MP Mike Hancock was necessary so that the woman could feel she had "a fair hearing and a fair crack of the whip".
The report was written by Nigel Pascoe QC, who was asked by the city council to investigate the allegations for code of conduct proceedings.
The woman, a female constituent and a young mother, says Mr Hancock made "unwelcome sexual approaches". The leaked, redacted version of the report describes the account she gave as "credible".
The alleged sexual assault victim of MP Mike Hancock has won a bid to force a Lib Dem-led council to make available a full version of a QC's report about her accusations at a forthcoming civil court action.
Portsmouth City Council, where Hancock is a councillor, opposed the application for full disclosure of the report - a redacted version of which has already been leaked to the public.
But Master Leslie, a High Court official, ruled disclosure was necessary so that the woman could feel she had "a fair hearing and a fair crack of the whip".
Lib Dem leader Nick Clegg said he "acted immediately" when he was told legal proceedings were being taken against MP Mike Hancock, who has been accused of sexual misconduct.
The Deputy Prime Minister said: "You can only react to things that are put to you and the first time that specific allegations were put to me was when legal proceedings were launched at the beginning of last year.
"That is when I acted, I acted immediately because I was as appalled as anyone by the seriousness of these allegations, and that's why I now want to see justice done.
"The process, which is now in the courts, should be seen through to its conclusion".
In an exclusive interview with ITV News Meridian under fire Portsmouth MP Mike Hancock refused to answer questions about his future. He was speaking to reporter Richard Jones.
Children could be offered free bus travel under plans being considered by the Liberal Democrats, according to the Daily Telegraph.
Deputy Prime Minister Nick Clegg was reported to be "very keen" on the proposal, which it is hoped would encourage older children to become more independent.
The report claims free child bus passes could be announced later this year as part of a package of measures that would include the Conservatives' tax break for married couples - a policy which has been ridiculed by the Lib Dem leader.
A senior Lib Dem source said it was too early to say whether the free bus travel plan could be delivered, adding that it was "jumping the gun" to suggest it formed part of the party's negotiating strategy with their Coalition partners.
The Met Police said a 59-year-old man was arrested on Tuesday in Kingston, on suspicion of possessing indecent images of children.
He was taken into custody at a south London police station and bailed to a date in August.
According to the London Councils' website, Liberal Democrat Kingston-Upon-Thames council leader, Councillor Derek Osbourne, was first elected as a councillor in 1986 before becoming leader between 1997 and 1998, and again in 2003.
He was parliamentary candidate for Kingston upon Thames in 1992 fighting the then Chancellor Norman Lamont.
A Liberal Democrat council leader has resigned after being arrested on suspicion of possessing indecent images of children.
Councillor Derek Osbourne, who has been leader of Kingston upon Thames since 2003, was arrested by police on Tuesday.
Derek Osbourne has resigned from the Liberal Democrat Group.
We are deeply shocked by these allegations but I am unable to comment further as we must now allow the police the time and space they need to investigate the allegations thoroughly and without prejudice.
The new acting leader of Kingston Council said the local Liberal Democrat group were "deeply shocked" by the arrest.