This Week’s Techlaw News Round-Up

November 3, 2023

UK law

UK government issues update on future financial services regulatory regime for cryptoassets

The UK government has confirmed its final proposals for cryptoasset regulation in the UK, including its intention to bring a number of cryptoasset activities into the regulatory perimeter for financial services for the first time. It has responded to the consultation and call for evidence on the future financial services for the first time. It has responded to the consultation and call for evidence on the future financial services regulatory regime for cryptoassets, which closed on 30 April 2023. It summarises the feedback received by HM Treasury in response to the consultation, and sets out how this has influenced further development of the government’s approach. It says that the UK remains committed to creating a regulatory environment in which firms can innovate, while maintaining financial stability and clear regulatory standards so that people can use new technologies both reliably and safely.

UK government issues update on plans for the regulation of fiat-backed stablecoins

The UK government has also provided an update on its legislative approach for brining fiat-backed stablecoins into the UK’s regulatory perimeter for financial services. It will inform development of the FCA and Bank of England’s approaches for regulating stablecoin issuers and custodians, and systemic digital settlement asset payments systems and service providers respectively.

Managing the failure of systemic Digital Settlement Asset (including stablecoin) firms

In addition, the UK government consulted on its approach to managing the failure of a systemic digital settlement asset (including stablecoin) firms by applying modified Financial Market Infrastructure Special Administration Regime (FMI SAR) to such firms. Overall, respondents were broadly supportive of the proposed approach. Some respondents sought clarity on how the FMI SAR would be applied in practice, especially with regard to the additional return or transfer of customer funds and custody assets objective. The government has set out its response and will lay regulations to implement the policy intent described in the consultation in due course and will provide further clarity on the operation of the modified FMI SAR by making insolvency rules.

ICO reprimands University Hospitals of Derby and Burton NHS Foundation Trust for lost referrals

The ICO has issued a reprimand to Derby and Burton NHS Foundation Trust (UHDB) after a computer system caused some patient referrals to be delayed or lost altogether. The infringement was first detected at The Florence Nightingale Community Hospital in Derby. In 2019, UHDB was informed by NHS England of an issue with the national digital platform where referrals dropped off the worklist after 180 days. After 550 days, if not managed appropriately, the information would be lost to the hospital altogether. The complaint was made to the Trust in January 2023 by a patient, then reported to the ICO. The investigation found UHDB failed to implement a formal process or apply a suitable level of security when processing referrals. UHDB failed to have any formal oversight in place to ensure referrals were being effectively managed. As a result of this error, nearly 5,000 patients were affected. Of those, more than 4,100 patients experienced delays in their referral which had the potential to cause distress and inconvenience. The remaining 569 patients’ referrals disappeared from the system altogether. Some patients had to wait for over two years for medical treatment to be arranged. Actions recommended in the reprimand include supporting affected patients, ensuring that processes are in place to prevent a repeat of the issue and sharing learning from the mistakes across the Trust.

ICO fines companies for spam adverts

The ICO has fined three financial companies £170,000 collectively for sending illegal direct marketing adverts. It fined Digivo Media Ltd, which traded as Rid My Debt, £50,000 for sending more than 415,000 text messages without consent. Rid My Debt sent messages offering “free advice” or a “free pack”. These messages were classified as marketing as they encouraged people to go to the Rid My Debt website and so breached the law. The ICO fined MCP Online Ltd £55,000 for making unwanted calls about pensions. MCP made 20,939 unwanted direct marketing calls to people who were registered with the Telephone Preference Service in breach of the law. The ICO fined Argentum Data Solutions Ltd £65,000 for sending and allowing third parties to send more than 2.3 million direct marketing text messages without consent. Argentum promoted a range of services including car finance compensation claims, boiler replacement schemes and housing repairs. These messages did not allow the receiver to opt out of future messages, therefore breaching the Privacy and Electronic Communications Regulations 2003.

CAT says that iPhone claim vs Apple may proceed

In the case of Mr Justin Gutmann v Apple Inc, Apple Distribution International Limited, and Apple Retail UK Limited, the Competition Appeals Tribunal has authorised opt-out collective proceedings brought on behalf of iPhone users against the Apple corporate group. Allegations have been made that Apple abused a dominant position when it introduced software updates for around 34 million iPhones. The updates aimed to reduce the rates of unexpected power offs that users experienced. it is argued that Apple hid from users that under certain conditions, the updates slowed down the iPhones significantly. The claim is estimated to be worth at least £853 million. The CAT ruled that there was a realistic prospect of making good the case at trial and so the claims should be certified. Therefore, the CAT dismissed Apple’s strike out and summary judgment applications.

IPA and ISBA launch industry for use of generative AI in advertising

The IPA and ISBA have announced twelve guiding principles for agencies and advertisers on the use of generative AI in advertising. The principles are broad-bush and designed to ensure that the industry embraces AI in an ethical way that protects both consumers and those working in the creative sector. They cover issues around transparency, intellectual property rights, human oversight and more. These principles are not exhaustive and apply only to the creative process rather than other areas of the industry. The IPA and ISBA will consider publishing additional best practice guidance around the use of AI in other areas in due course.

International law

International Guiding Principles for Advanced AI systems

The International Guiding Principles for Organizations Developing Advanced AI Systems have been published and aim to promote safe, secure, and trustworthy AI worldwide and will provide guidance for organisations developing and using the most advanced AI systems, including the most advanced foundation models and generative AI systems. This non-exhaustive list of guiding principles is discussed and elaborated as a living document to build on the existing OECD AI Principles in response to recent developments in advanced AI systems and are meant to help grasp the benefits and address the risks and challenges brought by these technologies. These principles should apply to all AI actors, when and as applicable to cover the design, development, deployment and use of advanced AI systems.