Traditional food industries remain an integral part of Malaysia’s cultural and economic identity, yet their regulatory compliance continues to be challenged by structural limitations, resource constraints and evolving food safety expectations. This paper examines the governance of regulatory adherence among keropok lekor SMEs in Terengganu, focusing on food safety, halal assurance, internal operational behaviour and institutional readiness. Using conceptual analysis supported by relevant literature, the study highlights how regulatory frameworks are often designed for industrial scale rather than micro enterprises, resulting in compliance gaps that stem from economic feasibility, limited technical capacity and weak documentation culture. Microbiological risks persist particularly where temperature control, sanitation procedures and raw material segregation are inadequate, demonstrating the need for risk based intervention strategies. The findings indicate that certification is recognised as valuable, yet its pursuit is frequently obstructed by cost, procedural complexity and uncertainty in navigating requirements. Internal factors such as management attitudes, safety culture and continuity of training further influence compliance outcomes. The discussion proposes a multi tiered policy approach that includes proportional regulatory systems, targeted technical upgrades, simplified certification pathways, strengthened food safety governance and the integration of supportive digital tools. The study concludes that sustainable compliance in traditional seafood based SMEs requires interaction between regulatory design, capability development and ecosystem collaboration. Enhancing regulatory alignment and institutional support offers a pathway toward stronger food assurance, market confidence and long term business sustainability for one of Malaysia’s most distinctive cultural products.