We have a problem where our JIRA/JSD configuration is the following:

• User directory order is set to
  • 1) JIRA Internal Directory
  • 2) Active Directory (Read-Only)
• JIRA External User Management is ON
• JSD Public Signup is ON

JIRA Version: 7.1.7
JSD Version 3.1.7

• All (internal) JIRA users are employees in Active Directory, and cannot change their password within JIRA. They must go through Active Directory. This is expected behavior.
• All (external) JSD users are stored in the JIRA Internal Directory. We would expect that a public user who signed-up within JSD could be able to self-manage their own password resets regardless of how user management is configured in core JIRA. This is not the case.

When a public user (residing in JIRA Internal Directory) attempts to change their password, they get the following error message: "This instance does not support password reset. Please contact the system administrator." 

The ask / suggestion is to have "External User Management" be configurable independently at both the JIRA and JSD level.