Less than 10 members of the Scottish Defence league were escorted by officers in Glasgow's Pollokshields area on Sunday to lay a wreath at the spot where William McKeeney was murdered by two Asian youths last year.
The group went ahead with their event at the scene of the murder outside Mr McKeeney's house despite requests from the victim's family not to do so.
The SDL's presence in the area, combined with a counter demonstration, brought several hours of chaos to Glasgow's south side, with the police now facing questions over why they allowed it to take place.
One resident, who asked not to be named, said he had been threatened with arrest for referring to the SDL as fascists, adding that officers told him to return to his home and claimed several streets were essentially under siege during the three-hour episode. He said: "The distress brought to this area was disproportionate to any democratic right to protest."
Fellow resident Danny Boyle said: "What transpired on Sunday was a police operation – which trampled on the rights of local residents – to facilitate political extremists."
Unite Against Fascism Scotland, the counter-demonstrators, said it was making a formal complaint against Strathclyde Police over the event.
A spokesman for Strathclyde Police said he was unable to comment.