Moderate friend holding key I would return (7)
I believe the answer is:
mediate
'moderate' is the definition.
(I've seen this before)
'friend holding key i would return' is the wordplay.
'friend' becomes 'mate' (mate is a kind of friend).
'holding' is an insertion indicator.
'key' becomes 'e' (musical key).
'i would' becomes 'I'd'.
'return' is a reversal indicator.
'id' reversed gives 'di'.
'e'+'di'='edi'
'mate' enclosing 'edi' is 'MEDIATE'.
(Other definitions for mediate that I've seen before include "Help resolve a dispute" , "Act as negotiator between opposing side" , "Umpire has to" , "Act as conciliator" , "ie Tamed (anag.)" .)