The Justice Department has asked the Supreme Court to endorse a new definition of illegal insider trading that would apply to people who have never before been considered corporate insiders.

Trading stocks on confidential information should be illegal not only for corporate executives, lawyers, stock traders and others with access to company secrets, but also for those who misappropriate facts that can be used to make profits in the stock market, government lawyers contended in a Supreme Court brief filed Monday.

Broadening the sweep of the insider trading law to cover outsiders is necessary to close "what would otherwise be a large and illogical loophole in the securities laws," the Justice Department argued.

The proposed new definition of insider trading is outlined in the government's response to the Supreme Court appeal of R. Foster Winans, the former Wall Street Journal reporter who tipped off traders to stock tips that were going to appear in the Journal's "Heard on the Street" column.

Winans was fired from the Journal in 1983 after the Securities and Exchange Commission charged he had been paid $30,000 to give tips to traders who subsequently made $690,000 in the market on the basis of the information. Winans and two associates were convicted of securities fraud in 1985 and appealed to the Supreme Court, which agreed in December to hear the case.

The Winans case was one of the first to hint at the widespread abuse of inside information on Wall Street. Since then, insider trading has exploded into the stock market's biggest scandal, with charges against dozens of brokers, investment bankers and lawyers at some of the best known Wall Street firms.

Federal securities laws do not define insider trading, but a series of court decisions have spelled out who is and is not an insider.

SEC Chairman John Shad recently told Congress he sees no need to write a new law to define the crime.

Traditionally, federal laws against insider trading have applied to insiders with a "fiduciary duty" to a corporation not to use confidential information that would damage the company. In the Winans case both the judge who found him guilty and an appeals court ruled that Winans had damaged the reputation of Dow Jones & Co., publisher of the Journal, by misappropriating facts he learned as a reporter.

The "misappropriation theory" has never been upheld by the Supreme Court, which has rejected insider trading charges against a printer who traded stocks based on confidential documents he was preparing. The printer had no legal obligation not to use the company secrets, the court said, suggesting the law might be applied in other cases.

In his appeal earlier this year, Winans said the case extends the securities fraud law "beyond all reasonable bounds" by applying the law "not to any alleged fraud on securities investors, but to a potential injury to a newspaper's reputation."

Securities lawyers said yesterday the Supreme Court's eventual decision on Winans is not likely to have much impact on the current insider trading scandal, which mostly involves Wall Street professionals.

The "misappropriation theory" under which Winans is charged is "clearly broad enough to cover those people who are traditionally in the securities business," said Robert Morvillo, a New York criminal defense lawyer.

But the new definition of insider trading advocated by the Justice Department in the Winans case "extends the universe to those not in the business," Morvillo said. "You can argue the morality of what Winans did, but I think there are a lot of people in the securities business and the criminal defense bar who are very dubious of that legal theory being characterized as insider trading."

The Justice Department brief contends the Winans case is the logical extension of previous cases. If Winans is not considered an insider, the brief argues, it "would leave a large and illogical gap in the enforcement of the securities laws: it would permit persons who trade on information that is misappropriated from a tender-offer bidder, from an investment banker advising a client about a possible investment in the subject company or, indeed, from any party other than the company whose shares are traded, to go largely unpunished."

Justice Department lawyers said the broader definition of an insider is needed to protect "the investing public's legitimate expectation of honest and fair securities markets where all participants play by the same rules." They warned that "trading on misappropriated information inflicts a wound on the market and all who participate in it." Staff writer Steven Coll in New York contributed to this report.