Moderators can only edit usergroups below them. Example as follows.
Public
- Manager
- - Administrator
Registered
- Author
- - Publisher
- - - Moderator lv2
- Moderator lv1
In the above case Moderator lv1 should be able to edit Registered, but not Author. Moderator lv2 should be able to edit Registered, Author, and Publisher but not Moderator lv1. That's basically the only way to have what you're wanting and this only applies to profile edits.