Undercover officers are not explicitly banned from having sex with targets because it would give potential criminals an easy test to find out whether someone was who they said they were, police chiefs and inspectors said.
But Chief Constable Jon Murphy, the lead on organised crime for police chiefs, said it would be "morally wrong" and "grossly unprofessional" for undercover officers to sleep with protesters, as Mark Kennedy claims to have done.
While there is no explicit ban, police officers are expected to act with integrity, legitimacy and proportionality at all times, the Association of Chief Police Officers (Acpo) said.
The details emerged as inspectors published the findings of their review, after Mr Kennedy's actions led to the collapse of a high-profile case against green campaigners accused of planning to invade Ratcliffe-on-Soar power station near Nottingham last year .
Mr Kennedy, who spent seven years posing as long-haired drop-out climber Mark "Flash" Stone, including a six-week stint without a break, has admitted he had sexual relationships with at least two women during the operation.
The review by Her Majesty's Inspectorate of Constabulary (HMIC) into undercover policing of protests called for tougher oversight and control.
It said the code for undercover officers clearly states "that conduct must still be consistent with the spirit of the regulations and with the fundamental aims of the respective organisation".
But its full contents remain secret as revealing them would provide criminals with automatic tests to find out whether an individual was an undercover officer, HMIC said.
Sir Denis O'Connor, the Chief Inspector of Constabulary, said: "As for the code, we have given an indication of the sort of content.
"What I would say about the code is the code expects the best from police officers. They are governed by regulations and the law when they're undercover as they are when they're wearing the uniform.
"But it would be unwise for us to get into details about their behaviour because there are people who study these things and they would automatically become tests for those individuals.
"I think the clue is in what I said earlier on about expecting the best, and that means (they must) be professional in every sense."
He added: "We think if we say too much about that then we risk revealing clear opportunities to people to just test those people on assignments."
The review also praised the work of undercover officers, citing cases where they have helped prevent bomb attacks and seize weapons from extremists but future operations should be approved in advance by high-level authorities outside the police, it said.
Reflecting on the Kennedy case, O'Connor called for police chiefs to establish a system where prior approval from the Office of Surveillance Commissioners (OSC) would be needed for pre-planned, long-term operations.
Currently, the Home Secretary's approval is needed before a bug can be set up, which may take 15 seconds, but an assistant chief constable can sign off putting an undercover officer in place, sometimes for years, he said.
While there were "only a handful of this kind of undercover deployments active at any one time", operations were not controlled as well as those in other units which used undercover officers to tackle serious criminality.
This may have been because undercover officers in what was the National Public Order Intelligence Unit (NPOIU) were seeking intelligence to stop criminal activity, rather than evidence to be used in courts, inspectors said.
Sir Denis said that while the ability to use undercover officers was "an absolutely essential tactic to protect people", a series of controls should be brought in to test whether a potential deployment is necessary and proportionate.
He called for a clearer distinction between public order policing and tackling domestic extremism, which are now both part of the National Domestic Extremism Unit (NDEU), with extremism being managed under the counter-terrorism network in the future.
Sir Denis also revealed he had referred a matter involving an issue of control within the Metropolitan Police's Special Demonstration Squad (SDS), which was closed down in 2008, to the police watchdog after inspectors uncovered documents containing information "we thought could be problematic".
"They may turn out not to be significant," he said.
The review was ordered after questions were raised about the proportionality of covert tactics and of such a lengthy and costly operation targeting green campaigners planning to invade the Ratcliffe-on-Soar power station near Nottingham.
The case against them collapsed in January last year after they claimed an undercover officer offered to give evidence on their behalf.
Mr Kennedy has since said he fears for his life, describing the world of undercover policing as "grey and murky", adding: "There is some bad stuff going on. Really bad stuff."
But the HMIC report found he worked outside the code of conduct for undercover officers, became "resistant to management intervention", and review and oversight was insufficient.
"He seems to have believed he was best placed to make decisions about how his deployment and the operation should progress," the report said.
Mr Kennedy worked undercover in 11 countries on 40 occasions, mostly on "European-wide protest issues", but there was no single officer in control and the authorising officer was not even always told Mr Kennedy was going overseas, nor given relevant information about what happened while he was there.
His supervisor built up a close relationship with him over seven years and "the degree of challenge and intrusiveness" into his activity "proved insufficient".
Mr Kennedy also defied instructions and went abroad with a protester in 2009 and carried on working against instructions despite being arrested in 2006.
"The full extent of his activity remains unknown," the report said.
Despite uncovering "serious criminality", and helping tackle a group capable of using homemade bombs, there were "insufficient checks and balances" into his actions and "little consideration" was given to an exit plan, the inspectors found.
The Association of Chief Police Officers (Acpo) said it hoped the report's recommendations "can ensure that the public have confidence in the use of these tactics to keep communities safe".
Chief Constable Murphy said: "This review recognises that undercover officers play a critical role gathering evidence and intelligence to protect communities from harm.
"It is one of the most challenging areas of operational activity undertaken by the police service.
"When used correctly it is lawful, ethical, necessary and proportionate."
He added: "The police service would welcome increased oversight in this critical area of policing."
Ben Stewart, one of the defendants in the Ratcliffe-on-Soar case whose conviction was overturned, said: "It looks like a cover-up.
"Kennedy's controllers have advanced the 'one rogue cop' defence and the authors of this report have happily accepted it."
He went on: "In reality, it's inconceivable that Kennedy's superiors weren't fully aware of the abuses he and other undercover officers were committing in the peaceful protest movement.
"They were only caught out because we exposed them, but there's little in this report that would prevent the same thing happening again.
"We now know some undercover officers were even having kids with activists then walking away, but a report commissioned by the police and conducted by the police has cleared the police of serious wrong-doing.
"In the real world, people's lives have been wrecked and their most basic rights trampled on, almost certainly with the full approval of senior officers."
The Independent Police Complaints Commission (IPCC) said the additional issue referred to the watchdog by the HMIC related to "concerns about potential issues of authorisation between 2000-2005 under the Regulation of Investigatory Powers Act".
Moir Stewart, the IPCC's director of investigations, said: "I have been in contact with the MPS (Metropolitan Police Service) and asked them to consider whether the matters raised by HMIC are referable.
"The MPS are carrying out a wider review into the activities of undercover officers and they have agreed that, should any recordable conduct or possible criminality involving other officers come to light as a result of this review, it will be referred to the IPCC."
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