Oscar's allowed to go around with a small hooter (5)
I believe the answer is:
owlet
'a small hooter' is the definition.
(I've seen this before)
'oscar's allowed to go around with' is the wordplay.
'oscar' becomes 'o' (phonetic alphabet: alpha, bravo, charlie etc.).
'allowed' becomes 'let' (I've seen this before).
'to go around' is an insertion indicator.
'with' becomes 'w' (abbreviation**).
'o'+'let'='olet'
'olet' placed around 'w' is 'OWLET'.
(Other definitions for owlet that I've seen before include "Young hooter" , "Wise avian's youngster?" , "new hooter?" , "Baby bird; moth" , "Young bird; moth" .)