Hi Steve, Svetoslav,
I managed to get it work with help from support team. Abstract from the ticket for fix is as below.
In order to modify this behavior you need to change default content filters. By default the following filters are applied:
Please refer to the following KB article where you can see how you can change default filters.
Control which filters the RadEditor uses
What you need to do is to remove DefaultFilters and then add all the desired filters only. After that you have to restart the application in order changes to take effect.
I had to disable FixUlBoldItalic, MozEmStrong and ConvertTags for this to work.
Thanks for help. I hope this information will help someone else too.