Directive (EU) 2019/2034 of the European Parliament and Council provides a regulatory framework for the prudential supervision of investment firms across the EU. The Directive aims to ensure effective supervision that is proportionate to the risks inherent in different types of investment firms, particularly those not deemed systemic. It introduces specific capital and governance requirements, while addressing dependencies between investment firms and clients, thus safeguarding financial stability.

Key provisions include the establishment of uniform initial capital requirements, robust supervisory powers for competent authorities, and enhanced cooperation between national supervisors. The Directive also mandates harmonised internal governance, risk management protocols, and remuneration policies, emphasising transparency and risk assessment. This approach ensures investment firms operate on sound financial bases while mitigating compliance burdens.