Error "SQL1159 Initialization error with DB2 .NET Data Provider, reason code 3" when trying to c (4246874)

When trying to connect to a z/OS or LUW (AIX) database, the following error message is displayed:

System.InvalidOperationException
SQL1159 Initialization error with DB2 .NET Data Provider, reason code 3, tokens C:\Program Files\Quest Software\Toad for DB2 4.6\SQLLIB\bin\db2app.dll,
Stack Trace:
at IBM.Data.DB2.DB2ConnPool.Open(DB2Connection connection, String& szConnectionString, DB2ConnSettings& ppSettings, Object& ppConn)
at IBM.Data.DB2.DB2Connection.Open()
at Quest.Toad.Db.Connection.OpenConnection(IDbConnection connection)
at Quest.Toad.DB2.DB2ToadConnection.OpenConnection(IDbConnection connection)
at Quest.Toad.Db.Connection.AllocConnection()
at Quest.Toad.Db.Connection.Connect(Boolean notify)
at Quest.Toad.Db.Provider.BackgroundConnector.CreateBackgroundConnection()