This is an ex-HTML

Okay, I think I'm going mad. I put the following into our CMS:

<ul>
<li> Item 1
<ul>
<li> SubItem 1</li>
<li> SubItem 2</li>
</ul>
</li>
<li> Item 2</li>
</ul>

and it (silently, without any notification) 'corrected' it to the following:

<ul>
<li>Item 1
<ul></ul></li>
<li>SubItem 1</li>
<li>SubItem 2</li>
<li>Item 2</li></ul>

I pointed this out to the people who are setting up the new site for us, and they raised it as a support call with the CMS people, and got the following response:

"Could you please use the following schema:

<ul>
<li>Item 1</li>
<ul>
<li>SubItem 1</li>
<li>SubItem 2</li>
</ul>
<li>Item 2</li>
</ul>

Such syntax is formatted correctly."

If such syntax is formatted correctly, why doesn't it validate? I'm not even trying to be a validation Nazi about this (it's not as if anything that comes out of this CMS is ever going to validate anyway), it's more that I don't really want to have to 'correct' all our existing HTML to prevent it being 'corrected' by the CMS.