Environmental Management Solutions (EMS) is being investigated by regulators for "potential market manipulation, options trading issues and disclosure issues," the company announced Friday.

EMS said the OSC investigation, which it learned of Friday, is focused on the time when Frank D'Addario was chairman and chief executive officer of the company.

EMS has been in involved in a bitter proxy fight with D'Addario. The company fired him from his role as vice-chair in January, saying an audit report alleged that company funds had been misappropriated.

D'Addario has put forward an alternate slate of directors to be voted on at a special meeting of shareholders on Apr. 29. He accuses the current management of having only a minor stake in the company (D'Addario has 25 per cent of the shares.)

He has always denied any wrongdoing.

"The management and independent directors of EMS are committed to working closely with the OSC in its formal investigation, in an effort to establish the facts about these questionable activities for the company's shareholders," EMS chief executive Tony Busseri said in a statement.

EMS is currently chaired by former Ontario Premier Mike Harris.

Current management is restructuring the company. After a spate of acquisitions in the past few years, losses have grown and cash flow has fallen, even as revenues soared.

Environmental Management Solutions expects fiscal year 2005 revenues in the $95 million to $100 million range. It provides organic waste management and site cleanup services to industry, primarily in Ontario, Quebec and Alberta.

EMS shares closed Friday at 78 cents, down 1 cent.