Canada’s junior public markets have traditionally provided emerging companies with an important pathway to raising growth capital. However, declining listings, limited liquidity, rising compliance costs and difficulties attracting investment have raised questions about the ability of these markets to support Canadian businesses.
A new report from the Standing Senate Committee on Banking, Commerce and the Economy is calling for substantial reforms to address these challenges.
Released in October 2026, From Potential to Prosperity: The urgent case for greater investment in Canada’s SMEs examines the structural barriers limiting access to capital for Canadian small and medium-sized enterprises (SMEs).
While the report addresses the broader financial system, several of its recommendations focus specifically on strengthening Canada’s public capital markets, making them more accessible to growing companies and reducing the costs associated with becoming and remaining publicly listed.
For companies considering an initial public offering (IPO), reverse takeover (RTO), qualifying transaction (QT) or other public listing structure, the report raises important questions about the future of Canada’s junior markets and their role in financing corporate growth.
Canada’s Junior Public Markets Are Shrinking
One of the report’s most significant findings concerns the declining number of operating companies listed on the TSX Venture Exchange (TSXV).
According to the Senate committee:
- The number of operating companies listed on the TSXV declined from 2,329 in 2002 to 1,362 in 2025.
- The number of companies graduating from the TSXV to the Toronto Stock Exchange (TSX) declined from a high of 72 in 2007 to 11 in 2025.
These figures reflect a substantial contraction in junior-market participation and a decline in the number of companies progressing to Canada’s senior exchange.
The committee identifies several challenges affecting public markets, including low liquidity, high compliance costs, regulatory complexity and reduced participation by smaller investment dealers.
However, the decline in listings cannot be attributed to regulation alone. Market conditions, investor preferences, financing availability and corporate consolidation may also influence listing activity.
The broader concern is whether Canada’s public markets continue to provide emerging businesses with an effective means of raising capital and supporting long-term growth.
Reducing the Cost of Becoming and Remaining Public
Recommendation 7 of the Senate report calls for securities regulatory requirements that are proportionate to a company’s size, risk and stage of development.
This is particularly relevant to junior public companies, which must satisfy ongoing reporting, disclosure, audit and governance obligations regardless of their financial resources.
The committee recommends reviewing these requirements to reduce unnecessary costs while maintaining appropriate investor protection.
It also proposes clarifying materiality standards to focus disclosure obligations on information reasonably expected to affect a company’s share price or valuation.
For smaller issuers, the costs of remaining publicly listed can represent a significant portion of their available capital, particularly where companies have limited revenue or remain in the exploration, research or development stages.
Reducing unnecessary compliance costs could allow more capital to be directed toward operational activities, including exploration, research and development, commercialization and business expansion.
However, any changes would need to preserve the quality and reliability of information available to investors.
The challenge for regulators is determining where requirements can be simplified without undermining confidence in the public markets.
Access to Investors Remains a Significant Challenge
Becoming publicly listed does not automatically provide a company with access to sufficient financing.
An important distinction exists between obtaining a stock exchange listing and developing the investor relationships, trading liquidity and market participation necessary to support future capital raises.
The Senate committee identifies barriers affecting both investors seeking opportunities in smaller companies and issuers attempting to attract investment.
In Recommendation 6, the committee proposes reviewing prospectus exemptions, accredited investor requirements and other restrictions that may limit participation in Canada’s private and public capital markets.
Among the proposals is greater use of investor self-certification based on relevant financial knowledge and experience, rather than relying exclusively on prescribed financial thresholds.
The report also discusses allowing broader participation through investment limits designed to manage risk.
These proposals could be relevant to companies raising private capital before a public listing, as well as publicly traded companies undertaking subsequent private placements.
The Canadian Securities Administrators (CSA) has separately proposed Multilateral Instrument 45-111, Self-Certified Investor Prospectus Exemption. The proposed framework would permit eligible investors meeting specified knowledge or experience criteria to invest up to $50,000 annually across qualifying investments, subject to conditions.
The proposed harmonized framework has not yet been adopted. Existing exemptions also differ by jurisdiction.
Expanding eligible investor participation could increase financing opportunities for Canadian businesses, although additional investor access would not necessarily translate into increased demand for individual securities.
The Declining Role of Independent Investment Dealers
Another concern raised in the report is the reduced participation of independent investment dealers in Canada’s junior public markets.
Historically, smaller investment dealers have played an important role in helping emerging companies raise capital and access investors.
The Senate committee heard testimony suggesting that industry concentration, regulatory compliance costs and Know-Your-Product requirements have made it increasingly difficult for smaller dealers to participate in financing junior issuers.
These requirements are intended to protect investors by ensuring that registered dealers understand the securities and investment products they recommend.
However, the committee questions whether the associated costs and administrative requirements have created disproportionate barriers to financing smaller businesses.
Recommendation 6 calls for a review of these rules and greater support for diversified financing channels, including independent investment dealers and exempt market dealers.
For prospective public companies, access to experienced capital markets intermediaries remains an important consideration.
A successful public listing involves more than satisfying regulatory and stock exchange requirements. Companies must also consider how they will attract investors, support market awareness and finance operations after becoming publicly traded.
Tax Incentives Could Encourage Greater Investment
The Senate report also identifies tax policy as an important tool for stimulating investment in Canadian SMEs.
Under Recommendation 3, the committee proposes several measures that could benefit junior public companies and their investors.
These include providing investors in qualifying junior-listed SMEs with tax treatment comparable to investments in Canadian-controlled private corporations, expanding flow-through share provisions beyond the resource sector and permitting capital gains tax deferrals when proceeds from the sale of qualifying SME shares are reinvested in other Canadian SMEs.
The committee also recommends exploring targeted investment tax credits and capital gains exemptions to encourage investment in growing Canadian businesses.
One particularly interesting proposal is the potential expansion of flow-through share financing beyond Canada’s resource industries.
Flow-through shares have long been used to attract investment into qualifying mineral exploration and other resource activities by allowing eligible expenditures to be renounced to investors.
The Senate committee suggests that extending similar incentives to other capital-intensive sectors could encourage financing for businesses that require significant investment before generating revenue.
Any expansion would require careful consideration of eligible expenditures, qualifying companies and the treatment of investors.
These proposals remain recommendations and should not be interpreted as tax measures that are currently available.
Nevertheless, they reflect growing attention to the role tax policy can play in attracting capital to Canada’s emerging public companies.
Securities Regulators Are Already Considering Changes
The Senate report comes at a time when Canadian securities regulators are examining reforms intended to improve the competitiveness of the country’s capital markets.
On July 16, 2026, the CSA published Consultation Paper 51-406, Modernizing the Regulation of Public Companies.
The consultation considers several potential changes, including more proportionate regulation for venture and non-venture issuers, alternative financial reporting requirements, private placement hold periods and modifications to material change reporting.
The consultation remains open until November 13, 2026.
Separately, in March 2026, the CSA adopted a voluntary semi-annual financial reporting pilot for eligible venture issuers listed on the TSXV and Canadian Securities Exchange (CSE).
Under the pilot, qualifying issuers may elect to report semi-annually rather than filing first- and third-quarter financial reports, subject to prescribed conditions.
This represents a concrete example of regulatory changes intended to reduce certain reporting obligations for smaller public companies.
The CSA is also considering amendments to the Listed Issuer Financing Exemption.
The proposed amendments would codify increased capital-raising limits introduced through temporary exemptive relief in 2025 and streamline other requirements. The consultation closes on October 21, 2026.
Taken together, these initiatives indicate that regulators are actively examining how to improve financing access and reduce regulatory burdens while retaining necessary investor protections.
Whether the changes ultimately adopted will materially improve junior-market financing conditions remains to be seen.
Institutional Capital and the Financing Gap
Beyond public-market regulations, the Senate report raises broader concerns about the availability of growth capital for Canadian businesses.
The committee identifies a financing gap affecting companies that have moved beyond the earliest stages of development but are not yet sufficiently large to attract significant institutional investment.
Large institutional investors generally operate with investment requirements and transaction sizes that may not be suited to smaller companies.
The committee recommends encouraging greater institutional participation in Canadian SME financing through investment aggregation vehicles, co-investment structures and public-private financing arrangements.
Although these recommendations are not directed exclusively toward publicly traded companies, they address a broader challenge confronting Canadian capital formation.
Businesses need access to appropriate financing throughout their development, from initial investment through expansion and, where appropriate, participation in senior public markets.
Strengthening the connections between these financing stages could help businesses grow without being forced to pursue a premature sale or seek financing outside Canada.
What Does This Mean for Companies Considering Going Public?
The Senate report reinforces an important principle: a public listing should form part of a broader corporate financing and growth strategy rather than being treated as an end in itself.
Canada continues to offer several pathways to becoming publicly traded, including traditional IPOs, reverse takeovers, qualifying transactions involving Capital Pool Companies (CPCs) and direct listings.
Each structure has different requirements, transaction costs, financing implications and suitability considerations.
Companies evaluating a public listing should consider not only the process of becoming publicly traded but also their expected capital requirements, ability to attract investors, anticipated market liquidity and ongoing reporting obligations.
The report’s recommendations, if implemented, could improve several of these considerations over time.
More proportionate regulation could reduce ongoing compliance costs. Broader investor participation could provide additional financing opportunities. Tax incentives could encourage more investment in qualifying companies, while reforms affecting investment dealers could potentially improve access to capital markets intermediaries.
However, none of these proposed reforms guarantees that an individual company will be able to complete a financing, achieve an attractive valuation or establish an active trading market.
Companies must continue to assess their financial position, management capabilities, business objectives and readiness for the responsibilities associated with being publicly traded.
Conclusion: Strengthening Canada’s Public Capital Markets
The Senate committee’s report provides a detailed examination of the challenges facing Canadian SMEs and the structural issues affecting their access to capital.
Its recommendations concerning public-market regulation, investor participation, tax policy and capital formation are particularly relevant to Canada’s junior public markets.
The decline in TSXV operating company listings and graduations to the TSX highlights the importance of examining whether the current public-market framework adequately supports smaller companies seeking growth capital.
Regulatory initiatives already underway suggest that some of these issues are receiving attention. However, the effectiveness of future reforms will depend on their final design, implementation and impact on both issuers and investors.
For Canadian businesses considering going public, the central question remains whether a public listing provides the appropriate platform for their financing requirements and long-term growth objectives.
A competitive, accessible and appropriately regulated junior public market is an important component of Canada’s broader capital formation system.
The Senate report offers a potential framework for strengthening that system.
Considering a Public Listing in Canada?
Companies evaluating an IPO, reverse takeover, qualifying transaction or alternative public listing structure should assess their financing requirements, transaction structure and ongoing obligations before proceeding.
Go Public in Canada provides strategic consulting and transaction coordination services to companies evaluating opportunities to enter Canada’s public markets.
Contact us to discuss your company’s objectives and the potential pathways available.
Sources
- Standing Senate Committee on Banking, Commerce and the Economy, From Potential to Prosperity (October 2026), particularly Recommendations 3, 5, 6 and 7.
- Canadian Securities Administrators, Consultation Paper 51-406 (July 2026).
- Canadian Securities Administrators, Semi-Annual Financial Reporting Pilot (March 2026).
- Canadian Securities Administrators, Listed Issuer Financing Exemption Consultation (July 2026).
The regulatory and tax reforms discussed in this article include proposals and recommendations that have not been implemented. Companies and investors should consult the applicable current securities and tax requirements before making decisions.