WYSIWYG toolbar indent produces invalid markup

I just upgraded from 3.1.3 to 3.2.1, and the ‘indent’ icon on the TinyMCE toolbar is producing invalid markup on nested lists

So I will make a list:
1) type line
2) select UL icon
3) make a few more lines
4) select line of text and click on ‘indent’ icon
5) save

…after I save, WP will fix the invalid nested code (I have the setting enabled under reading).

The toolbar is producing this code:

<ul>
<li>parent list item 1</li>
<ul>
<li>child list item 1</li>
</ul>
<li>parent list item 2</li>
</ul>

…instead of:

<ul>
<li>parent list item 1
<ul>
<li>child list item 1</li>
</ul>
</li>
<li>parent list item 2</li>
</ul>