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Ok. here's what I came up with: if you go to "Parallel's Desktop Preferences/Devices" and chose "Connect It to to the Active Virtual Machine" when...
Well @parallels I am on day 3 of the V.16 evaluation period and am not able to test anything due to this problem. Tech support is only available...
I reinstalled the tools, but no cigar...
Big Sur not asking where to use peripherals after parallels 16 installed - card reader must be used on windows, bt being initialized automatically...