Above appears to have been introduced in https://git.savannah.gnu.org/cgit/bash.git/diff/jobs.c?h=devel&id=ee88838cf9421e2e40a7b7969cdf78a0010b075c
P.S. a similar thing happens (not resolved by reverting the above) with:
set +m; $BASH --norc -i -c 'exec xxx'
where "xxx" is not a valid command.
