On Thursday, Finance Minister François-Philippe Champagne will table Budget 2026. Hopefully, the capital markets file gets some love.
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What Budget 2026 Should Take from the Senate’s SME Report
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| Citation | Ari Pandes. 2026. What Budget 2026 Should Take from the Senate’s SME Report. Opinions & Editorials. Toronto: C.D. Howe Institute. |
| Page Title: | What Budget 2026 Should Take from the Senate’s SME Report – C.D. Howe Institute |
| Article Title: | What Budget 2026 Should Take from the Senate’s SME Report |
| URL: | https://cdhowe.org/publication/what-budget-2026-should-take-from-the-senates-sme-report/ |
| Published Date: | November 5, 2026 |
| Accessed Date: | November 5, 2026 |
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Published in Calgary Herald
by J. Ari Pandes and Jeff Tory
If the government is looking for a road map, it’s got one. The Senate banking committee recently released its report on unlocking credit and capital for small and medium-sized businesses (SMEs). This was a year-long effort, during which the committee heard from more than 35 witnesses.
Full disclosure, one of us was among them.
The committee’s central finding is simple — Canada does not have a shortage of capital.
It has a problem getting capital to the companies that need it to grow. Nowhere is that clearer than in our junior public markets, where, for decades, the TSX Venture Exchange (TSXV) and its predecessor exchanges have been a key route for emerging companies to access early public capital, grow and graduate to the big leagues — the Toronto Stock Exchange (TSX).
As the head of the Ontario Securities Commission told the committee, Canada has a junior market ecosystem that doesn’t exist in any meaningful form in the U.S. It has been one of our competitive advantages.
But we are letting that advantage slip. Between 2002 and 2025, the number of operating companies on the TSXV fell from 2,329 to 1,362. It isn’t because companies are moving up — graduations to the TSX fell from 72 in 2007 to 11 last year. The real problem is that fewer companies are joining the junior board.
In 2007, the TSXV saw 230 IPOs and capital pool company listings. Last year, there were 11.
Why are so few companies listing? Part of the answer is who sells stocks to Canadians. One witness told the committee that the six largest banks manage more than 90 per cent of Canadian wealth. Advisors used to be the conduits for small company stories. Today, the committee notes that know-your-product rules have made it almost impossible for brokers to recommend SME stocks.
The independent dealers that once filled the gap are disappearing. An industry group told the committee that about half the dealers it represents stay out of junior markets entirely, citing the regulatory burden and cost. With no one telling their story, smaller companies have lost their audience, and with it a reason to go public.
So what should Budget 2026 do? Give investors a reason to come back to our junior markets. Ottawa recently announced a Productivity Mega Deduction to spur business investment. That’s a good start, but it rewards companies for investing, not investors for backing growing companies.
The committee offers several ways to fix that. Three stand out. First, give investors in junior market companies tax treatment comparable to investing in Canadian-controlled private corporations. Second, let investors defer capital gains on SME shares when they reinvest in other Canadian SMEs. Third, extend flow-through shares beyond the resource sector.
Flow-through shares are a proven tool for financing risky, early-stage resource companies and helped make us a leader in mining finance. They can do the same in tech and other sectors.
Ottawa should also name a minister responsible for SMEs and convene the standing roundtable on public market competitiveness the committee proposes. But many of the levers on capital markets sit with the provinces and their regulators. They need deeper co-ordination and harmonization, rules proportionate to a company’s size and stage, and a fresh look at know-your-product rules.
The timing is good. The Canadian Securities Administrators also have an open consultation on modernizing public company regulation that closes Nov. 13. The committee’s recommendations need to make their way into those discussions as well, delivering a one-two punch at both the provincial and federal levels to revitalize access to capital.
Some will worry these measures favour the wealthy. But that’s the wrong way to look at it. Building Canadian champions spreads the wealth they create to workers, savers and communities across the country.
Let’s hope Budget 2026 gets that.