An authentication error has occurred (OXFFFFFFFF) - Parallels Server error while connecting

Open gpedit.msc applet on the Parallels Server.
Navigate to Computer Configuration -> Administrative Templates -> Windows Components -> Remote Desktop Services -> Remote Desktop Session Host -> Security.
Enable the Require use of specific security layer for remote (RDP) connections and select RDP as Security Layer.
Disable Require user authentication for remote connections by using Network Level Authentication policy.

Have to disable the third option "Always prompt for password upon connection" also for the system not to ask password after clicking the application icon.

Also update the client and server to the very latest update.

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