Overview of European Capital Markets Regulations

By Till Tolksdorf, October 2025, 5 min read

The text outlines key EU regulations affecting alternative investment firms, explaining why they were introduced and their main focus areas.

Markets in Financial Instruments Directive II (MiFID II, 2014)
Introduced after the 2008 financial crisis, MiFID II was designed to make Europe’s financial markets more transparent and to strengthen investor protection. It expanded the scope of earlier trading rules, imposed stricter reporting and record-keeping requirements, and limited opaque “dark-pool” trading. For private equity (PE) firms, MiFID II reinforces obligations for transparency and fair treatment of investors.

Alternative Investment Fund Managers Directive (AIFMD, 2011)
The AIFMD emerged in response to concerns about the systemic risks posed by hedge funds and PE funds that were largely unregulated before the crisis. It established a harmonized regulatory framework across the EU, focusing on risk management, leverage limits, disclosure to regulators and investors, and the authorization of fund managers. Its goal is to ensure financial stability and investor protection.

General Data Protection Regulation (GDPR, 2016)
Prompted by growing concerns about data misuse and surveillance, the GDPR unified data protection laws across the EU. It grants individuals greater control over their personal information and requires organizations—including PE firms—to safeguard data, maintain transparency about processing, and report breaches. For PE investors handling sensitive financial and corporate data, GDPR compliance is central to trust and legal certainty.

Sustainable Finance Disclosures Regulation (SFDR, 2019)
Adopted under the EU’s Green Deal agenda, the SFDR aims to combat “greenwashing” by standardizing how financial institutions disclose sustainability information. It requires PE and other investment firms to disclose how environmental, social, and governance (ESG) factors are integrated into decision-making, promoting accountability and comparability in sustainable investing.

Corporate Sustainability Reporting Directive (CSRD, 2021)
The CSRD builds on earlier non-financial reporting rules, expanding the scope to cover more companies and introducing detailed, standardized sustainability metrics. Its intent is to improve transparency on how businesses affect people and the environment, guiding investors—including PE firms—toward more sustainable capital allocation.

Green Claims Directive (2024 proposal)
This forthcoming directive addresses misleading environmental marketing claims. It was proposed to ensure that companies substantiate and verify any “green” claims with scientific evidence. For PE portfolio companies, it raises the bar for environmental transparency and compliance in consumer communications.

Enhancement and Standardization of Climate-Related Disclosures for Investors (2024)
Aligned with the EU’s climate goals, this regulation mandates consistent, comparable climate-related reporting by financial actors. It was introduced to improve investors’ ability to assess climate risks and opportunities across markets.

Artificial Intelligence Act (2024)
As AI adoption surged, the EU introduced the AI Act to mitigate risks related to safety, bias, and privacy. It classifies AI systems by risk level and imposes stricter controls on “high-risk” applications. For PE firms investing in or deploying AI technologies, the act sets compliance boundaries to ensure ethical and accountable AI use.