Tighter controls for bouncers, wheel clampers and private security staff come into force on Wednesday.
Security firms are unlicensed at present
Up to 40% of nightclub and pub bouncers could find themselves out of a job with the introduction of the regulations.
They will also have to prove that they have not been involved in crime.
The regulations - managed by the Security Industry Authority (SIA) - will also apply to wheel clampers, security guards and private investigators.
To obtain a compulsory new licence, workers in the private security industry will have to prove they have had no involvement in crime for up to five years.
Under the Private Security Industry Act it will be an offence to provide a service covered by the legislation without a licence, to employ someone without a licence or falsely claim approved
SIA chief executive John Saunders said the possession of a licence would never be a "guarantee of absolute purity".
He estimated that between 30% and 40% of door supervisors will not be able to win a licence and that the private security industry as a whole is expected to
lose one in five of its 350,000 workers.
"The implications are very significant for the industry," he said.
"It is going to have 20% of its workforce removed over a period of time."
SIA chairwoman Molly Meacher said it was possible for those who committed serious crimes more than five years ago to be granted a licence at the SIA's
"We have not yet written the guidance to our staff about how they deal with someone who enters our discretionary field," she said.
She said the Human Rights Act would place limitations on agencies for door bouncers.
"There are downsides to people having rights - although those rights are very important.
"We can't afford to lose a human rights challenge on the basis that we have not allowed people to have a fair trial (for a licence)."
Pilot schemes are due to be launched for the 100,000 bouncers in England and Wales and the 2,000 wheel clampers who operate on private land later this year.
The licensing is due to start nationally next summer, with completed aimed at early 2005. Licensing of security guards begins in 2005.
These workers will be required to have two conviction-free years to qualify for a
licence, during which they will have to prove they had "no criminal intent".
Those who have committed serious offences must have been on the right side of the law for at least five years.
Outside these periods, the SIA's 50 staff will have discretion on whether to grant a licence after analysing the applicant's case.
There have already been criticisms over the range of the regulations - which cover contract, but not employed security guards.
Mrs Meacher said there was pressure to include "in-house" security.
"This is because of the very obvious reason that if we regulate one lot of people but another group doing pretty much the same job are not regulated, then
the scoundrels will simply move into the unregulated sector," she said.
And although wheel clampers who operate on private land are covered by the Act, vehicle removers are not, she added.
"If we regulate wheel clampers on private land then the cowboys will move to become vehicle removers," she said, adding that it was an important issue which could be altered.
The SIA will only consider convictions, not police paperwork, disclosing whether someone was suspected of a crime.