WASHINGTON -- Vice President Dan Quayle and a top aide should have withdrawn from participation on a special White House council when it dealt with matters related to their financial interests, a congressional hearing was told yesterday.

Two law professors said Mr. Quayle, chairman of the White House Council on Competitiveness,improperly considered a recycling rule that affects his family-owned newspaper investment.

Also, Allan B. Hubbard, the council's executive director and Mr. Quayle's deputy chief of staff, should have stopped participating in clean-air discussions because of his investments in a chemical firm and power company, the witnesses said.

Both men have denied through Mr. Quayle's spokesman that they did anything improper. The vice president is exempt from a number of conflict-of-interest provisions under federal law.

Mr. Hubbard was granted a waiver by Mr. Quayle last June that exempts him from some conflict-of-interest provisions.

Monroe H. Freedman of Hofstra University and Robert H. Aronson, associate dean and law professor at the University of Washington, told the House Energy and Commerce environment subcommittee that both Mr. Quayle and Mr. Hubbard had conflicts of interest and that Mr. Hubbard violated the law.