PARIS (REUTERS) - Former French President Nicolas Sarkozy was placed under investigation on Tuesday in a scandal over irregularities in his 2012 re-election campaign finances, the Paris Prosecutor said, dealing a serious blow to his hopes of running again in 2017.

Sarkozy, 61, was questioned all day by magistrates at the Paris financial prosecutor's office before being notified that he was under investigation for "suspected illegal financing of an election campaign for a candidate, who went beyond the legal limit for electoral spending".

The legal move is a prelude to a possible trial but does not lead automatically to prosecution. However, it means he will be tied up in legal proceedings for months to come, making it hard for him to contest a centre-right primary in November ahead of next year's presidential election.

Sarkozy has repeatedly denied knowledge of dual accounting and some €18 million (S$28 million) in false invoices issued by the Bygmalion event organisation company that meant his campaign costs were more than double the legal limit.

Four senior figures in the 2012 campaign have already been placed under investigation for alleged political financing offences, including his campaign manager and treasurer, as well as four former Bygmalion executives.

Sarkozy's lawyer Thierry Herzog told reporters he would appeal the decision, but that the maximum penalty he could face was a fine of €3,700.

He said that Sarkozy had not been placed under investigation in the more serious Bygmalion affair, for which he was given the status of a legally assisted witness. That means magistrates do not see grounds for now to prosecute him in the case.

"I can say that I'm satisfied that the law in large part has been kept to and there was nothing linking President Nicolas Sarkozy to the Bygmalion case," Herzog said. "It is only about exceeding the amount of campaign spending," he said.

Nevertheless, it throws the presidential race wide open at a time when ex-Prime Minister Alain Juppe has taken a solid lead in opinion polls over at least six other declared contenders for the centre-right nomination, with more expected to enter the contest soon.

The winner of the primary is likely to face incumbent Socialist President Francois Hollande and far-right anti-immigration populist Marine Le Pen, although Hollande has not announced whether he will run again.

In a book published last month, Sarkozy wrote: "It will no doubt be hard to believe, but I swear it is the strict truth: I knew nothing about this company until the scandal broke."

The Bygmalion case is not the only investigation in which Sarkozy faces legal scrutiny. A welter of cases concerning alleged corruption, fraud, favouritism and campaign finance irregularities have cast a shadow over his comeback hopes.