After delegating password reset permissions, the given user is able to reset passwords bypassing the existing Default domain and Fine grained password policies.
This is by design, the product complies with the native Domain Administrator behavior. An Enhancement Request (TF00774822) has been created detailing the feature above.
The product team will evaluate the request and this feature may become available on a future release of the product.
Please refer to this article for updates or contact support referencing the Enhancement Request ID: TF00774822.