The governing body had hoped to introduce tough new measures for those found guilty of racist and sectarian offences that would have punished clubs on the basis of "strict liability".
But just five per cent of the association's 93 member clubs backed the motion at the SFA's Annual General Meeting at Hampden as they expressed fears that they could be held accountable for unruly fans. Regan admitted the plan had been "too onerous" for his members but with a working party now set to examine a compromise, he insisted a workable solution was achievable.
The Hampden chief said: "The clubs have asked us to set up a working party to establish whether there is a viable deterrent for unacceptable behaviour that lies somewhere in between our current rule and strict liability.
"Our members accept we need to do more, to work harder to stamp out unacceptable behaviour but to move from our current rule where clubs are allowed to defend such cases by saying they are taking all reasonable steps to a new proposal of strict liability was a step too far.
"The current rules are written in such a way that we haven't been successful in bringing any prosecution forward but there has to be some sort of middle ground that moves us forward."
The proposal has been pushed by FIFA and UEFA, who have both adopted stances of "zero-tolerance" in relation to discriminatory behaviour in recent months. Among the new deterrents they want to see introduced are a minimum five-game ban for offending players as well as points deductions and stadium bans for clubs who allow fans to shout racist and offensive chants.
Regan added: "We're disappointed because this was an opportunity - rather than a threat - to try and deal with our own affairs, to get them in order prior to the world governing body telling us how they feel we should deal with such matters.
"When you compare the behaviour in Scotland with countries elsewhere in Europe - Serbia and Italy spring to mind - you might argue we might not have as serious an issue as exists elsewhere on the continent.
"But there are localised pockets in Scotland where the behaviour is preventing families from coming back into the ground. We want to deal with that with a proactive approach. The Scottish FA doesn't want to wait to be told, we want to take responsibility ourselves for sorting out our own issues."
- strict liability