Canada's Exempt Market Surges: A New Era of Capital Formation?

TORONTO, ON – November 18, 2025

The Rise of Alternative Finance

Canada’s capital markets are undergoing a significant shift, with a growing number of companies turning to the exempt market to raise capital. Recent data from the Ontario Securities Commission (OSC) reveals a sustained boom in this sector, signaling a potential long-term trend away from traditional public offerings. The OSC’s updated Exempt Market Dashboard, now encompassing data through 2024, paints a picture of a dynamic market that has nearly doubled in size since pre-pandemic levels, reaching $295.6 billion in 2023. This surge isn't merely a temporary blip; it reflects a deliberate move by companies seeking faster, less regulated access to funding.

“The traditional IPO route is becoming increasingly cumbersome and expensive for many companies,” explains a corporate finance lawyer specializing in exempt market transactions. “The exempt market offers a streamlined process, allowing them to access capital more quickly and efficiently.” While the primary drivers for utilizing this market differ for companies, the appeal of reduced regulatory burdens and faster access to capital is undeniable. The OSC data also highlights the increasing dominance of institutional investors, accounting for approximately 98% of the capital raised in the exempt market in 2021. These investors are drawn to the potential for higher returns, despite the associated risks.

Navigating the Risks for Investors

While the exempt market presents opportunities for both companies and investors, it's crucial to acknowledge the inherent risks. Unlike public markets, companies raising capital through the exempt market are not subject to the same rigorous disclosure requirements. This lack of transparency can make it difficult for investors to fully assess the risks involved. “Investors need to conduct thorough due diligence and understand the potential downsides before committing capital,” cautions an investor advocacy group representative. “The absence of a prospectus means they have fewer legal protections in case things go wrong.”

The OSC is actively working to mitigate these risks through increased oversight and investor education. The commission encourages investors to verify the registration of investment providers and carefully review any available investor materials. However, ultimately, the onus lies on the investor to make informed decisions. The OSC’s dashboard, while offering increased transparency into exempt market activity, is a tool, not a guarantee of investment success. A significant portion of activity in the exempt market, around 83% in 2021, comes from financial issuers, potentially concentrating risk within specific sectors. This requires investors to diversify their portfolios and conduct thorough sectoral analyses.

A Deep Dive into Ontario's Exempt Market Activity

The growth of the exempt market is particularly evident in Ontario, which remains a key hub for capital formation in Canada. The OSC data reveals that a substantial portion of exempt market activity originates from companies based in the province. In 2021, just over 25% of issuers participating in Ontario’s exempt market were reporting issuers, raising only 17% of the aggregate gross proceeds. This points to a vibrant ecosystem of smaller, non-reporting companies utilizing the exempt market to fuel their growth.

One notable trend is the increasing use of the Listed Issuer Financing Exemption (LIFE). This exemption, introduced in 2022 and recently amended by the OSC, allows publicly listed companies to raise capital more efficiently. While specific quantitative data for 2024 is still emerging, the OSC has signaled that LIFE is gaining significant traction. The move towards LIFE also reflects a broader shift in market dynamics, with a growing preference for streamlined capital raising solutions. It’s also worth noting the increasing presence of real estate and mortgage-related investments within the exempt market, with a noticeable rise in capital flowing into these sectors in 2021. These sectors, while potentially lucrative, also carry inherent risks that investors must carefully consider.