Both settlements were entered into on a no-contest basis, but required approval by an independent panel. Ernst & Young didn't accept nor deny the allegations issued against it by the OSC's enforcement branch.
"The terms of this settlement, I think, are unprecedented in Canada in these circumstances, and are consistent with the level of payments imposed by the SEC (U.S. Securities and Exchange Commission) in similar matters," OSC vice-chairman James Turner said Tuesday in granting approval of the agreements.
The Ontario regulator introduced the "no-contest" settlement policy earlier this year in an effort to process a backlog of investigations, and instead focus on the most serious cases.
Only a "limited" number of cases, and only ones that didn't involve criminal activity, would be allowed to settle without admitting any wrongdoing or confirming allegations, the OSC said at the time.
In the case of Sino-Forest, Ernst & Young agreed to pay $6.5 million. The auditor had been accused of failing to meet industry standards through its accounting measures and failing to verify the existence of some of the company's key assets.
"Auditors are gatekeepers who are responsible to shareholders," OSC lawyer Yvonne Chisholm told the hearing.
"This settlement achieves key regulatory goals that we submit will have a deterrent effect on Ernst & Young and on other auditing firms."
The OSC staff did not allege, and found no evidence, that Ernst & Young employees were involved in dishonest conduct, she added.
Within the Ernst & Young settlement tied to Sino-Forest, $1.5 million will go towards paying for "most" of the expenses incurred by OSC staff during their investigation, while the remaining $5 million will be allocated to undetermined third parties at the discretion of the OSC, Chisholm said.
Typically those funds go towards various causes, including an OSC investor education fund, said OSC spokeswoman Carolyn Shaw-Rimmington.
Ernst & Young lawyer Linda Fuerst said the settlement will avoid lengthy and costly hearings for both cases that were scheduled to take place later this year.
Sino-Forest was once the most valuable forestry company on the Toronto Stock Exchange with a market cap of more than $6 billion. But in 2011 it became embroiled in a scandal over its finances after investment firm Muddy Waters Research called it a complex Ponzi scheme.
The report prompted investigations by the Ontario regulator and the RCMP.
Sino-Forest filed for creditor protection the following year, and is now controlled by its bondholders under a different entity called Emerald Plantation Holdings Ltd.
Meanwhile, the OSC is also involved in a separate hearing related to allegations that former Sino-Forest executives lied to investors and attempted to mislead investigators.
As part of the settlement approved Tuesday, Ernst & Young has agreed to co-operate with the OSC in the hearing by making current employees available to testify and assist in efforts to make former partners at the auditor available.
Separately, Ernst & Young reached a $1.5-million OSC settlement involving Zungui Haixi Corp., a sportswear maker once listed on the TSX Venture Exchange. The auditor was accused of failing to respond to clear signs the company was at risk of fraud in two separate instances.
In the OSC findings, it said Ernst & Young failed to respond adequately to "risks" in the company's finances, which included the possibility that Zungui Haixi could use a fictitious distributor to artificially inflate its revenue figures.
The deal with the regulator follows an agreement by Ernst & Young to pay $117 million to settle a class action brought by shareholders of Sino-Forest and another $2 million to Zungui investors. Both factors were taken into consideration in the settlement, the OSC said.