Clue: Smug observation, not involving me, to take place (10)
Answer: COMPLACENT
Explanation: Definition: Smug
An envelope ('to take') of 'place' – lifted straight from the clue (not that there is anything wrong with that, as long as it is not too obvious, and, as here, it fits naturally into the surface) – in COM[me]NT ('observation') minus ME ('not involving me').