Hello,
What version of SEPM 12.1 are you running?
As a test would you mind going back into the Mail Server tab in the Server Properties in the SEPM and for the "User Name" entry I want you to put in the email address that the emails are supposed to be sent to. Leave the password field blank.
A quick way to send out a Notification would be to create an notification condition for "Authentication Failure".
1. Change Occurrences to 1
2. Add email address to sent out to
3. Log out then enter incorrect credentials on the SPAM notification will now be generated, check for email sent.
Also, check this Article:
Scheduled emails aren't sent from the Symantec Endpoint Protection Manager
http://www.symantec.com/docs/TECH103713
Email notifications fail to send from the Symantec Endpoint Protection Manager (SEPM) console
http://www.symantec.com/docs/TECH93803
Let me know if that works out.
Hope that helps!