The Directive 2004/39/EC, adopted on 21 April 2004, establishes a regulatory framework for markets in financial instruments within the EU. It aims to enhance investor protection and ensure the smooth functioning of financial markets by harmonising rules related to investment services, operations of regulated markets, and multilateral trading facilities (MTFs). The directive promotes transparency, best execution practices, and the prohibition of conflicts of interest while facilitating cross-border investment activities through mutual recognition principles.

Investment firms are required to obtain authorisation in their home member state, allowing them to operate throughout the EU. The directive also mandates effective organisational requirements, compliance with conduct of business rules, and the maintenance of adequate capital levels. Furthermore, it stipulates the conditions under which member states must supervise and enforce these regulations, ensuring that firms adhere to the established standards for investor protection and market integrity.