Getting error "Security Update Required" when trying to sync to corporate Exchange email

I am trying to Sync my phone to my corporate email account. When I create the account and try to sync I get the message "Security Update Required" and "Update security settings to use this account". I have deleted the account, rebooted the device and reset to factory defaults and still seeing the error. Cleared cache on the Security policy update service and restarted. Still nothing, Security policy updates list version SPD_v2_1501_1_2 if that means anything.

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