The result I know holds for SUBSEQUENCE closed languages, and not SUBSTRING closed. The confusion is frequent between english and french, since "subsequence" is translated into "sous-mot" which means litteraly "subword" or "substring"…
To be clear, $u=u_1u_2…u_n$ is a subsequence of $v=v_1v_2…v_m$ if and only if there exists $1\leqslant i_1 < i_2 < … < i_n \leqslant m$ such that $u = v_{i_1}…v_{i_n}$.
The proof I know is a bit long. I will add some details if necessary.
For $L$ any language, denote $\widehat{L}$ the set of words that have a subsequence in $L$: $$\widehat{L} = \{v\in\Sigma^*\mid \exists u\in L, u\preccurlyeq v\}$$
The proof goes as such:
- prove that for any sequence $(u_n)_{n\in\mathbb{N}} \in \left(\Sigma^*\right)^{\mathbb{N}}$, there exists two indexes $i<j$ such that $u_i\preccurlyeq u_j$;
- show that for any language $L$, there exists a finite language $F$ such that $\widehat{F} = \widehat{L}$;
- prove that if $L = \widehat{L}$, then $L$ is regular;
- conclude that if $L$ is a subsequence closed language, then it is regular.
Each step uses the result of the previous one.