Kirby is very correct. Colonel Penick and the 3rd (old) Cav MSM were known for permitting or committing atrocities, especially on southern sympathizers, and the state MSM apparatus and the General Assembly decided to chuck the regiment. This was not necessarily from events immediately before the disband order, but from a long list of depredations from 1862.
There is more after the disbanding. The actions of the 3rd (old) can be typified as "radical Union." Provisional Governor Gamble and the majority of the General Assembly at Jefferson City can be described under the label "moderate Union," meaning they advocated careful treatment of the secessionists under the theory that such easy treatment would hasten the reunification process and shorten the war. The radicals, most especially the Union soldiers from Missouri who had to face the southerners in guerrilla warfare at danger to their own lives, espoused force and violence to stop the rebellion. Eventually, the radicals won out and remained in power after the war to punish and disenfranchise the southerners still remaining in Missouri. The radical ascendency and repudiation of the moderates especially during 1864 tended to look differently on what happened to the 3rd (old) regiment back in early 1863, but the excesses of some of the 3rd (old) soldiers were hard for even other radicals to accept.
Please note that I said these depredations were committed by "some" of the soldiers, not all. From what I read Colonel Penick and some of the officers seemed to approve of the atrocities as a means of ending the rebellion, but this view was not held by all the officers and men of the 3rd (old).
A number of the former 3rd (old) troopers living in the Andrew and Buchanan County area of northwest Missouri later in 1863 reacted violently after murders of some local northern sympathizers and former comrades by the Joseph Hart guerrilla band there. With some friends a number of these veterans engaged in several weeks of murder, arson, and intimidation of southern sympathizers in that area and drove many southern families out. This was documented in the "St. Joseph Weekly Herald" newspaper (available in microfilm) which I used with some other sources to write about this spell of terror in my 1863 book. The Union command structure for this region had a hard time quelling this violence because locals were afraid or unwilling to talk to investigators.