A bonfire adorned with Parachute Regiment and "Soldier F" banners has been lit in Londonderry.
Police said they are treating the placing of the offensive material on the pyre in the nationalist Bogside estate as a "hate incident".
Soldier F, an ex-paratooper, is facing prosecution for two murders and four attempted murders committed on Bloody Sunday in 1972.
Posting on social media, PSNI Foyle said they have received "a number of reports" about the material.
"As a police service we recognise the hurt and frustration that this can cause. The display of this material has been perceived as offensive and distasteful," they said.
"We are treating this as a hate incident and will continue to gather evidence as this evening continues. Where crimes have been committed and suspects identified they will be brought before the courts.
"As always we will continue to engage with local representatives throughout the night to ensure the safety of everyone in the city."
The lighting of the bonfire comes days after a loyalist flute band was accused of insensitive behaviour after taking part in a loyal order parade through Derry on Saturday wearing uniforms carrying the regimental insignia and the letter “F”.
Police have sent prosecutors a report on the actions of Clyde Valley Flute Band, from Larne, to assess if members were guilty of provocative conduct.
A bonfire is torched on August 15 in Derry every year to mark a Catholic feast day celebrating the assumption of the Virgin Mary into heaven.
However, in recent times the fire, which is built by local youths, has become a source of contention and associated with anti-social behaviour.
Police monitored the final construction of the bonfire from a distance on Thursday, using cameras on high poles to capture scenes as hooded youths placed material about Solider F on the fire.